Apple Earnings Preview: What Might Be Expected from Fiscal Q3?

Apple Inc. reports fiscal third-quarter earnings after market close on Tuesday, July 31. Here’s a look at what might be expected from the tech giant’s results.

Print
https://tickertapecdn.tdameritrade.com/assets/images/pages/md/Man working on an Apple Macbook
4 min read

When Apple (AAPL) reports fiscal third-quarter earnings after the closing bell on Tuesday, July 31, analysts are expecting a quieter quarter. With no major product releases recently, it’s likely been business as usual at the tech giant. 

AAPL is expected to report adjusted EPS of $2.19 on revenue of $52.34 billion, according to third-party consensus analyst estimates. Management’s guidance calls for revenue between $51.5 billion to $53.5 billion. In the same quarter last year, AAPL earned $1.67 per share on $45.41 billion. 

AAPL sold 52.2 million iPhones in fiscal Q2, up 3% compared to the prior-year quarter. At the same time, average selling price (ASP) climbed 11% year over year to $728, helped out by the iPhone X and higher-priced new models. Analyst consensus estimates call for iPhone sales of 41.8 million units, up slightly from 41 million in the prior-year period. Analysts are also expecting iPhone ASP of $693, up from $606 a year ago.

While the iPhone still makes up a majority of its revenue, AAPL’s Services business has grown to a sizable portion of the company’s revenue as well. This segment includes results from the App Store, Apple Music, and the company’s other services. For fiscal Q3, analyst consensus is expecting $9.2 billion in revenue from Services. CEO Tim Cook said in 2017 his goal is to double revenue in the division by 2020, bringing it to more than a $50 billion annual run rate. 

AAPL’s Other Products division, which includes everything from AirPods and the Apple Watch, to Apple TV and the HomePod, has been AAPL’s fastest growing segment in recent quarters. It generated $3.95 billion in revenue in fiscal Q2, up 38% year over year. Management attributed 90% of the growth in this segment to wearables and home products. 

Outside of the company’s products, AAPL announced in May that it was increasing its buyback authorization by $100 billion, so management might provide some commentary around plans to execute those repurchases and progress so far. The company also hiked its quarterly dividend from $0.63 to $0.73 per share, giving it a current yield of 1.53%. 

At the end of fiscal Q2, AAPL reported it had $267.2 billion in cash and marketable securities, and a net cash position of $145 billion overall. Over time, the company has said it plans to become net-cash neutral, although it hasn’t really elaborated on what that looks like or the timeline for achieving that objective.   

Apple 2018 Stock Chart. So far this year, AAPL is up 10.87%, outperforming the S&P 500’s (SPX) 4.56% return, but lagging the Nasdaq 100’s (NDX) 12.02% increase. The stock hit a new all-time high of $195.96 on July 26. Chart source: thinkorswim® by TD Ameritrade.   Not a recommendation. For illustrative purposes only. Past performance does not guarantee future results.

Apple Options Trading Activity

Around AAPL’s upcoming earnings release, options traders have priced in a 3.5% stock move in either direction, according to the Market Maker Move indicator on the thinkorswim® platform. Implied volatility was at the 54th percentile as of this morning. 

In short-term trading at the August 3 weekly expiration, calls have been active at the 192.5 and 195 strike prices, with volume of 16,968 and 12,010 contracts, respectively, during Friday’s session. On the put side, trading has been heavy at the 185 and 190 strikes. 

Further out at the August 17 monthly expiration, trading on the call side has been heavier at the 195 and 200 strikes. Activity on the put side has been spread out between the 175 and 190 strikes, a pretty wide range. 

Overall, trading was leaning towards the call side with a put/call ratio of 0.773. 

Note: Call options represent the right, but not the obligation, to buy the underlying security at a predetermined price over a set period of time. Put options represent the right, but not the obligation to sell the underlying security at a predetermined price over a set period of time.

What’s Coming Up

It’s a busy week in the markets. July’s employment report is due out Friday morning. The Fed is holding its meeting on July 31 to August 1—traders are currently pricing in a 97% chance the Fed will hold rates steady, based on CME futures. And there are plenty of companies scheduled to report earnings this week: 

  • Pfizer (PFE) and Procter & Gamble (PG) before market open Tuesday, July 31
  • ADP (ADP) before the open on Wednesday, August 1, and Tesla (TSLA) after the close 
  • MGM (MGM) before the open on Thursday, August 2, and Activision Blizzard (ATVI) after the close 
  • Kraft Heinz (KHC) before the open on Friday, August 3

For a look at what else is going on, check out today’s Market Update if you have time. 

Good Trading,

JJ

@TDAJJKinahan

Visit the TD Ameritrade Markets Overview page for timely market information, articles, snapshots, earnings releases, and more.

Looking to stay on top of the markets on a daily basis? Check out my Daily Market Update on the Ticker Tape.  Or tune into the TD Ameritrade Network, which is live programming that brings you market news and helps you hone your trading knowledge.
The TD Ameritrade Network is brought to you by TD Ameritrade Media Productions Company. TD Ameritrade Media Productions Company and TD Ameritrade, Inc. are separate but affiliated subsidiaries of TD Ameritrade Holding Corporation.

Call Us
800-454-9272
Probability analysis results from the Market Maker Move indicator are theoretical in nature, not guaranteed, and do not reflect any degree of certainty of an event occurring.
 
TD Ameritrade and all third parties mentioned are separate and unaffiliated companies, and are not responsible for each other’s policies or services.
 
Inclusion of specific security names in this commentary does not constitute a recommendation from TD Ameritrade to buy, sell, or hold.

adChoicesAdChoices

Market volatility, volume, and system availability may delay account access and trade executions.

Past performance of a security or strategy does not guarantee future results or success.

Options are not suitable for all investors as the special risks inherent to options trading may expose investors to potentially rapid and substantial losses. Options trading subject to TD Ameritrade review and approval. Please read Characteristics and Risks of Standardized Options before investing in options.

Supporting documentation for any claims, comparisons, statistics, or other technical data will be supplied upon request.

The information is not intended to be investment advice or construed as a recommendation or endorsement of any particular investment or investment strategy, and is for illustrative purposes only. Be sure to understand all risks involved with each strategy, including commission costs, before attempting to place any trade. Clients must consider all relevant risk factors, including their own personal financial situations, before trading.

This is not an offer or solicitation in any jurisdiction where we are not authorized to do business or where such offer or solicitation would be contrary to the local laws and regulations of that jurisdiction, including, but not limited to persons residing in Australia, Canada, Hong Kong, Japan, Saudi Arabia, Singapore, UK, and the countries of the European Union.

TD Ameritrade, Inc., member FINRA/SIPC. TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank. © 2018 TD Ameritrade.

Scroll to Top