The Highly Anticipated Earnings Week
The upcoming week is pivotal for earnings, as several mega-cap technology companies are set to unveil their quarterly results. The indomitable strength of these mega-cap names continues to command attention, with many anticipating these results to sustain and propel the overall market momentum.
Among these companies, the market is particularly captivated by the impending release of Apple AAPL’s quarterly results, scheduled for February 1st after the market closes. The company has been on an impressive earnings streak, outperforming our consensus earnings and revenue expectations in the past three quarters and fueling a strong rally in its shares.
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The big question is, how do the expectations align as we head into this much-anticipated earnings release? Let’s delve into the headline estimates and a few other critical metrics to keep a keen eye on within this release.
Highlight Figures
Analysts have expressed bullish sentiments regarding the bottom line, with the Zacks Consensus EPS Estimate at $2.09, marking a modest 1.5% increase since November and suggesting a year-over-year growth of approximately 11%.
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Conversely, revenue expectations have seen a slight downward revision, with the quarterly sales estimate of $117 billion being adjusted 1.4% lower over the same period.
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Important Performance Metrics
One of the significant sources of growth for Apple in recent years has been its services portfolio, encompassing Apple Music, Apple TV+, Apple Arcade, Apple Pay, and more. For the upcoming quarter, an expected revenue of $23.3 billion from services is anticipated, reflecting a 12.5% growth from the year-ago mark of $20.7 billion. Apple has consistently exceeded expectations in this area in recent times.
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Furthermore, attention will be on the iPhone revenue, expected to be around $68.6 billion for the quarter, signifying a 4% year-over-year increase. Apple’s performance in this segment has been somewhat mixed recently, with the company falling short of consensus expectations in consecutive releases.
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Valuation
Apple’s shares are currently trading at a premium compared to historical levels, with the forward 12-month earnings multiple at 28.4X, surpassing the five-year median of 25.2X. Likewise, the forward 12-month price-to-sales ratio stands at 7.4X, close to five-year highs and exceeding the 6.0X five-year median.
Nonetheless, investors have shown no hesitation in paying the premium, given the company’s dominant position, as evidenced by the robust performance of its shares.
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Final Thoughts
The forthcoming week features a lineup of eagerly awaited earnings, with Apple AAPL taking center stage with its scheduled report. Earnings estimates have been raised, although revenue expectations have experienced a modest decline; however, both are anticipated to surpass the figures from the previous year.
Investors will remain on high alert for Apple’s Services results and iPhone sales, two crucial drivers of growth for the company. As the release approaches, the stock currently holds a Zacks Rank #3 (Hold).
