Three Numbers to Watch When Apple Reports Earnings

Tight Lips on Smartwatch Sales Will Have Observers Sleuthing

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Credit: Brent Lewin/Bloomberg

There's a lot to live up to when Apple releases earnings results after the market close today: Driven by iPhone sales, it's beaten analysts' estimates for profit in eight straight quarters and for revenue in seven of those.

The anticipation is building this time as well: The profit projection has climbed about 2.5% in the past four weeks as analysts at Pacific Crest Securities, Mizhuo Securities, UBS AG and others foresee strong sales for the smartphone.

Apple may report profit of $1.81 a share on revenue of $49.4 billion, based on the average of analysts' estimates compiled by Bloomberg. To get there, here are some of the key milestones the company needs to hit, based on the projections:

Apple may move 48.8 million units of its top-selling product, which accounted for almost 70% of total revenue last quarter. The past two quarters will be hard acts to follow as iPhone 6 and 6 Plus sales helped Apple reach all-time quarterly profit in the period that ended in December, followed by its second-highest profit last quarter. In that six-month stretch, Apple sold a combined 135.6 million iPhones, compared with 169.2 million for all of fiscal 2014.

Apple Watch
Apple may have sold 3.4 million smartwatches, with estimates ranging from 3 million to 5 million. The company's tight lip about the newest gadget has made it hard to assess the performance so far. There are two camps: Analysts who say shipments dropped after the first few weeks, and those who say it's steadily gaining acceptance. Analysts may have to do more sleuthing for a good number even after today's report because Apple has said it will lump Watch information into an "other" revenue category along with iPod, Apple TV, Beats headphones and speakers. For the full fiscal year, eight analysts on average project sales of 8.1 million watches.

Apple may have sold about 10.9 million tablets. In the fiscal second quarter, iPad shipments fell 23 percent to 12.6 million, a bigger drop than projected and the fifth straight quarter of year-over-year declines. Last month, Apple told developers that software changes to the iPad will let some of the devices multitask when video is being played, creating a picture-in-picture similar to features once found on high-end TVs. The software upgrades will be available this fall.

Also on the radar: Any commentary about China, where there was a steep selloff in stocks this month. Sales of iPhones there outpaced the U.S. for the first time in this year's first three months, and Chief Executive Officer Tim Cook plans to about double the number of stores in China by mid-2016.

China's market turmoil could affect iPhone sales in the current quarter, "assuming consumer confidence and spending in the region are affected by economic weakness," Bloomberg Intelligence's Matthew Kanterman wrote in a July 16 note. Steven Milunovich, an analyst at UBS, wrote on July 9 that a slowing Chinese economy is a risk for the Cupertino, California-based company: "Apple is OK for now but we will watch the situation closely."

~ Bloomberg News ~

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