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BMO Analyst Raises Apple's March Qtr. EPS Estimate But Warns On June Qtr.
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BMO Analyst Raises Apple's March Qtr. EPS Estimate But Warns On June Qtr.

Apr 4 2014, 10:57am CDT | by

I have followed BMO’s Apple analyst, Keith Bachman, for over a decade and overall he has a good handle on what to expect from Apple. He decreased his share count expectation for the March quarter,...

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16 weeks ago

BMO Analyst Raises Apple's March Qtr. EPS Estimate But Warns On June Qtr.

Apr 4 2014, 10:57am CDT | by

I have followed BMO’s Apple analyst, Keith Bachman, for over a decade and overall he has a good handle on what to expect from Apple. He decreased his share count expectation for the March quarter, which raised his EPS estimate from $10.16 to $10.23. However he points out that the Street’s June quarter revenue expectations could be too high. (Note that my family and I own Apple shares and I have sold put options which is a bullish strategy).

Analyst’s share count projections could be a bit high

Apple had 901.45 million diluted shares in the December 2013 quarter. On February 7 Tim Cook, Apple’s CEO, announced that the company had spent $14 billion in the 10 days post its earnings announcement to buyback shares. The shares low after its earnings announcement was $493.55, its high was $515.28 and it closed between $499.78 and $512.59 over those days. Using a $505 average price for what it paid Apple decreased its share count by about 27.7 million shares.

Since these did occur in late January and early February if these were the only share buybacks done during the quarter Apple’s share count would decrease by 18.5 million (two thirds of the 27.7 million). There may be some impact from additional Restricted Stock Units (RSUs) being awarded but I think that should be minimal since the company awarded 6.2 million RSUs in the December quarter vs. 7.8 and 5.6 million in all of fiscal 2012 and 2013, respectively. Also I suspect management could have spent more than the $14 billion in the quarter to buy back shares.

It appears that the March quarter share count should come down to at least 883 million shares and 874 million if you assume a 27.7 million decrease. Just the difference between the 18.5 and 27.7 million is an $0.11 impact to EPS.

Bachman’s share count is now at 880 million and of the other five analysts I’m currently tracking Steve Milunovich from UBS has the lowest share count at 874 million (looks like he subtracted the 27.7 million) while Katy Huberty from Morgan Stanley, Brian Marshall from ISI, Gene Munster from Piper Jaffray and Brian White from Cantor Fitzgerald are between 891.1 and 896.5 million shares. Since every 10 million shares impacts EPS by about $0.12 the analysts with higher share counts EPS estimates could be a bit low.

June revenue and potentially EPS estimates are too high

The Street’s (meaning sell-side analysts) average revenue estimates for the March quarter is $43.75 billion compared to Apple’s guidance of $42 to $44 billion. This seems reasonable since for the previous four quarters Apple has beaten the mid-point of its revenue guidance by $1.6, $0.8, $2.0 and $1.1 billion, respectively and the worst it has performed vs. the top-end was a shortfall of $400 million in the December quarter.

However the Street’s revenue projection for the June quarter is $38.65 billion, a decrease of 11% from its $43.75 billion in the March quarter. Bachman believes that this year’s seasonality will be more like fiscal 2013 when revenue declined 19% quarter over quarter vs. fiscal 2012 when it decreased 11%. This is because in fiscal 2012 the iPad 3 was launched on March 16, which led to a $2.5 billion sequential increase in iPad revenue in the June quarter. In fiscal 2013 when there wasn’t a new iPad announced in the same timeframe iPad revenue dropped $2.4 billion sequentially.

If you were to apply the same 19% revenue decline to the Street’s $43.75 billion Apple’s revenue for the June quarter would be $35.4 billion (vs. Street’s $38.65 billion). Bachman is at $36.6 billion with EPS of $7.87 (Street is at $8.59).

I overall agree with Bachman that expectations for the June quarter need to ratchet down especially since the buzz for the iPhone 6 is increasing. Besides the seasonality of iPads negatively impacting results if there is a more pronounced slowdown in iPhone sales due to people waiting the June quarter could be worse than expected.

Stock has been trading in a tight range

Since the decline and bounce back post earnings Apple’s shares have been trading in a fairly tight range of $520 to $545 since early February. It has been hovering around its 50 day moving average and technical indicators such as its Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) have been in neutral territory.

It does appear that with Apple’s strong buyback of shares earlier this year and with forming a base the stock shouldn’t have too much downside unless the above mentioned product revenue seasonality is much worse than expected. It is possible that results and especially the June quarter guidance could hit the shares similar to January but I expect analysts have and will continue to lower expectations going into the results being announced.

Source: StockCharts.com

Follow me on Twitter @sandhillinsight. You can find my other Forbes posts here.

 
Update
10

7 weeks ago

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Jun 9 2014 7:54am CDT | Source: Business Times Malaysia

KUALA LUMPUR: About RM47 million of contributions in the Teachers Provident Fund (KWSG) still remain unclaimed, the Dewan Rakyat w ...
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Update
9

7 weeks ago

Gold shop lost almost RM1mil

Jun 9 2014 3:50am CDT | Source: Business Times Malaysia

KANGAR: A gold shop owner lost almost RM1 million after after the safe on in his shop was brok ...
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Update
8

7 weeks ago

Motion to debate MAS losses in Dewan Rakyat rejected

Jun 9 2014 3:39am CDT | Source: Business Times Malaysia

KUALA LUMPUR: AN emergency motion to debate the losses incurred by Malaysia Airlines last year, amounting to RM1.2 billion was rejected by the Dewan ...
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Update
7

7 weeks ago

MH370 Tragedy: Hisham: RM27.6 mil spent on 1st phase of SAR

Jun 9 2014 2:11am CDT | Source: Business Times Malaysia

KUALA LUMPUR: Malaysia spent some RM27.6 million in its first phase of the search operations for missing Malaysia Airline flight MH370, said Acting Transport Minister, Datuk Seri H ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
6

7 weeks ago

9.1m litres of diesel seized in a month

Jun 8 2014 1:11am CDT | Source: Business Times Malaysia

PUTRAJAYA: The Domestic Trade, Cooperatives, and Consumerism ministry has seized some 9.1 million litres of diesel and property worth RM58 million since mounting ‘Operasi Diesel Sela ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
5

7 weeks ago

Girl, 9, awarded RM2.78m compensation for medical negligence

Jun 6 2014 4:56am CDT | Source: Business Times Malaysia

KUALA LUMPUR: A nine-year-old girl who suffered brain damage during her birth at a government hospital was awarded over RM2.78 milli ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
4

7 weeks ago

Malaysia's total trade in April up 12pc

Jun 5 2014 11:52pm CDT | Source: Business Times Malaysia

KUALA LUMPUR: Malaysia's total trade in April 2014 rose by 12 per cent from a year ago to RM123.86 billion due to growing trading activities, International Trade and Industry Minister Datuk Seri Mustapa Moha ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
3

7 weeks ago

Works Ministry to spend RM20m for upgrading works at 50 accident black spots

Jun 4 2014 11:35pm CDT | Source: Business Times Malaysia

JOHOR BARU: The Works Ministry will implement upgrading works at 50 accident prone locations in the country that have been identified this year involving an allo ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
2

8 weeks ago

Najib launches loan scheme for Ramadan traders

Jun 4 2014 10:24pm CDT | Source: Business Times Malaysia

PUTRAJAYA: Prime Minister Datuk Seri Najib Razak today launches RM45 million Ramadan Bazaar Scheme ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
1

8 weeks ago

Residents bring up objection against Kidex to Suhakam

Jun 4 2014 4:49am CDT | Source: Business Times Malaysia

PETALING JAYA: A group of 20 Petaling Jaya residents held a meeting with the Human Rights Commission of Malaysia (Suhakam) over their objection against the proposed RM2.2 billion Kinrara Da ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 

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