Despite strong sales, iPad supplies and Japan's quake make Q2's report a hard one to call
Nobody, not even CFO Peter Oppenheimer, thinks that Apple (aapl) earned as little as $4.90 per share on revenues of $22 billion last quarter -- the numbers he offered in January when he issued his guidance for the company's second fiscal quarter of 2011.
As usual in the Steve Jobs/Tim Cook era, the game at the end of each quarter is to try to predict how dramatically Apple beat not just its own laughably conservative guidance, but the consensus of Wall Streets' sell-side analysts who also estimate conservatively, although less so and for different reasons.
The leading amateur analysts, who don't have clients dependent on them for investment advice, tend to be more bullish. They also tend to do a far better job at predicting Apple's sales and earnings.
But given the uncertainties this quarter -- including the effects of Japanese tsunami and iPad 2 supply levels -- this could be one of those days where they they miss the mark from the other side.
Here are the numbers we'll be watching when Apple releases its earnings after the markets close on Wednesday:
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The top and bottom lines: According to Thomson Financial, whose consensus numbers have been inching up over the past two weeks, the Street is looking for Apple to report earnings of $5.36 on sales of $23.34 billion -- year-over-year gains of 61% and 73%, respectively. The amateurs we polled are looking for earnings of $6.33 on sales of $25.34 -- up 90% and 87.7%
, respectively. If Apple reports growth rates anywhere in the vicinity of 80% to 90%, expect to see the hedge funds covering their shorts in after-hours trading, if they haven't already done so. [UPDATE: Apple shares briefly hit $345.75 in early trading Wednesday, up $7.89 (2.3%).]
iPad unit sales: This was the hardest number to pin down in Q2, despite all those iPad 2 customers still camping overnight outside Apple stores six weeks after launch. That's because nobody knows how many of those customers walked away empty handed. Estimates of iPad sales for the quarter ranged in our poll from a low of 5.10 million to a high of 9.8 million, an extraordinary spread by any measure. We'd be inclined to expect something around the median -- 6.3 million -- were it not for court documents Apple filed Monday stating that by March the company had sold 19 million iPads. If Apple was referring to late March, that implies, according to Asymco's Horace Dediu, quarterly sales of as few as 4.2 million iPads -- a number that would disappoint even the most conservative Apple watchers. If Apple was referring to early March, however, or not counting iPad 2s, all bets are off.
Gross margin: Some analysts believe that the gross margin ratio -- revenue minus cost of goods divided by revenue -- is the most important number of all, because it tells them how efficiently a company is turning sales into profits. Three months ago, Apple surprised investors by telling them they could to expect the same healthy 38.5% gross margin Apple reported in Q1. The analysts we polled are looking for something around 39% (the pros' average) and 40.3% (the amateurs').
June guidance: This is the number that savvy investors have learned to discount but which can still send the stock spiraling down in after-hours trading. Apple traditionally guides "conservatively" -- which is to say it low-balls its forward-looking estimates so it can handily beat them three months later. According to Piper Jaffray's Gene Munster, the company's actual results over the past 17 quarters have clobbered not only its own guidance, but also the Street's estimates -- by an average of 7% in revenue and 26% in EPS. (See chart.) For the past five quarters, Apple's guidance has been more optimistic, beating the Street's consensus by 4% and implying revenue guidance this afternoon of $24.8 billion. Given the uncertainties in the wake of the Japanese tsunami, however, Munster expects Oppenheimer to revert to form and guide revenues 2% below consensus, or $23.39 billion.
Bottom line: This quarter is a crapshoot and next quarter could be even harder to predict. That said, Apple's shares hit something like a bottom Monday, dropping below $322 for the first time since December. Even with all the uncertainties, if the company reports anything close to triple digit growth for Q2 it will be hard for traders to bring the stock much lower.
Apple usually reports its earnings about a half-hour after the markets close. A conference call with analysts is scheduled to begin at 5 p.m. EDT (2 p.m. PDT) Wednesday and should last about an hour. Tune in here for our analysis.
Also on Fortune.com:
[Follow Philip Elmer-DeWitt on Twitter @philiped]