Apple To Report Earnings Amid A Busy Week Filled With Economic Data, Fed Meeting And More

When Apple Inc. 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 percent compared to the prior-year quarter. At the same time, average selling price (ASP) climbed 11 percent 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 percent year over year. Management attributed 90 percent 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 percent. 

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 percent, outperforming the S&P 500’s (SPX) 4.56 percent return, but lagging the Nasdaq 100’s (NDX) 12.02 percent 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 percent 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 percent chance the Fed will hold rates steady, based on CME futures. And there are plenty of companies scheduled to report earnings this week: 

• Pfizer Inc. PFE and Procter & Gamble PG before market open Tuesday, July 31
• Automated Data Processing ADP before the open on Wednesday, August 1, and Tesla Inc. TSLA after the close 
• MGM Resorts International MGM before the open on Thursday, August 2, and Activision Blizzard Inc. ATVI after the close 
• Kraft Heinz Co. 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. 

Information from TDA 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.