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Sunday, February 13, 2011

Apple's earnings to showcase one-two punch

Photo: AFP

SAN FRANCISCO - Apple Inc should affirm next week that its six-month-old iPad tablet computer is selling well despite a shaky consumer market, while the iPhone continues to fend off a strong challenge from rival Google Inc.

Analysts expect fourth-quarter earnings to showcase Apple's powerful one-two punch of the iPhone and the iPad, although some still question whether, with a plethora of rival products set to hit store shelves, Wall Street can justify Apple's stratospheric valuation.

The shares of the second largest corporation in the S&P 500 jumped more than 4 percent on Friday as anticipation mounted ahead of Monday's report.

As has been the case for many quarters, iPhone growth will be the main driver, even as anticipation builds over an iPhone early next year tailor-made for the network of top mobile carrier Verizon Wireless Inc -- a move that would instantly boost Apple's consumer reach in the US.

Apple's shares stand at a record high after breaking through the $300 mark for the first time this week. The company has so far proved resilient in the face of weak US consumer spending. At the same time, gross margins should get a boost from falling component costs.

Although there is little doubt September quarter numbers will be strong, investors have come to demand an out-sized performance, so the bar is raised every three months.

Analysts say a big upside surprise may be tougher to achieve this time around given constraints in iPad and iPhone supply.

But the iPad is playing a bigger role in Apple's business and could be a wild card this quarter, and Wall Street is eager to gauge consumer enthusiasm for the tablet. While demand has been strong, manufacturing bottlenecks have limited production.

Apple trades at nearly 21 times forward earnings, a healthy premium over smartphone and PC rivals.

A second leg

Investors are looking at the iPad as the second pillar of growth along with the iPhone, which has keyed Apple's surge over the past few years, but is facing stiff competition from smartphones based on Google's Android software.

"It's going to be a combination this time of their two most important products, iPhone and iPad, and both are going to do very well," said Gleacher & Co analyst Brian Marshall, who expects Apple to pass Exxon Mobil Corp as the largest company in the S&P 500 in short order.

Apple launched the iPad in April and sold 3.3 million units in the June quarter. Analysts expect sales of 4.5 million to 5 million units for September.

Susquehanna Financial analyst Jeff Fidacaro noted that because investor expectations are so high, there may be some disappointment if the iPad number is below 5 million.

Fidacaro said that, despite Apple's size, there is still room to grow because its key markets -- smartphones and tablets -- are young and expanding.

"You've got two huge product cycles going on right now," he said. "And the iPad has no competition."

iPhone sales should continue to be strong following the June launch of the iPhone 4, with estimates in the 11 million to 12 million unit range.

Fidacaro said Apple is building a CDMA iPhone for expected launch early next year, potentially with Verizon, that would add more than 10 million units to his 2011 sales estimate.

But the threat from Google looms and new rivals are emerging. Android was the most popular platform among US smartphone customers in the past six months, according to Nielsen.

"There's going to be no shortage of competition next year," said Pacific Crest Securities analyst Andy Hargreaves.

Elevated expectations

Apple, famous for its low-ball forecasts, stunned investors in July when it set a revenue outlook for September that was $1 billion higher than Wall Street's target.

The company has beat the consensus estimate in each of the past eight quarters by a minimum of 13 percent and has bested revenue estimates for the past seven quarters.

Hargreaves said investors should expect another beat this time around.

"I don't think it will be a big as what we've seen in the past, at least relative to our numbers, because of supply constraints early in the quarter," he said.

Apple is expected to post earnings of $4.08 a share on revenue of $18.9 billion, according to Thomson Reuters I/B/E/S.

According to StarMine's SmartEstimate, which places more weight on recent forecasts by top-rated analysts, Apple should post EPS of $4.17 on revenue of $19.1 billion.

Analysts expect a gross margin of 38.2 percent. Apple's margin has been pinched by the iPad, but falling prices for components such as NAND flash, which Apple consumes in huge amounts, could help in the September quarter.

Wall Street expects Apple to report sales of roughly 10 million iPods and 3.5 million to 4 million Mac computers.

Macs have been a steady source of strength for Apple over the past few years. Sales surged 24 percent in the US in the July-September period, according to industry tracker IDC, a far stronger performance that its rivals.

Apple could dominate the headlines next week. After its earnings report on Monday comes a media event on Wednesday focused on Mac computers. That is followed by quarterly results from AT&T Inc, the exclusive US iPhone carrier, and Verizon.

Friday, September 17, 2010

Asian shares sluggish on US nervousness, Japan woes

TOKYO - Asian stock markets were sluggish on Friday following a lackluster session on Wall Street and mixed economic data from Japan.

Tokyo's Nikkei index was down 0.87 percent, or 77.38 points, at 8.829.1 in the morning, Sydney's S&P/ASX 200 was down 0.20 percent at lunch, while Hong Kong and Shanghai were both flat in early trade, at 20,600.49 and 2,601.70 respectively.

Analysts said markets were reacting in large part to a tumble on Thursday on Wall Street, where traders were bracing for a sharp revision of US economic growth later on Friday and a speech by US Federal Reserve chief Ben Bernanke.

"Investors are growing increasingly concerned about the US economy and there are repercussions in the Japanese market," Naoki Fujiwara, fund manager at Shinkin Asset Management, told Dow Jones Newswires.

In New York the blue-chip Dow Jones Industrial Average closed below the sensitive 10,000 level for the first time in nearly two months, dropping 0.74 percent to 9,985.81. The broader S&P 500 index fell 0.77 percent and the Nasdaq 1.07 percent.

Compounding pessimism in Japan, data showed that deflation remained stubbornly entrenched in July, with the core consumer price index falling 1.1 percent from a year earlier, its 17th straight month of decline.

The consumer price data are likely to heighten doubts about the durability of Japan's recovery, which has come under pressure from the effects of a strong yen, feeding into tensions in the governing Democratic Party of Japan, where a leadership contest is under way.

In one bright spot, Japan's unemployment rate edged lower to 5.2 percent in July, its first fall in six months and a 0.1 percentage point drop from June.

Chinese stocks were dragged down by financial shares after disappointing results earlier in the week from insurance giant China Life, which was down 1.79 percent in early Hong Kong trade, adding to a fall on Thursday.

Bank of China was down 1.39 percent in Hong Kong after also disappointing with its first-half results.

Also contributing to Shanghai's limp start were comments Thursday by the head of the National Development and Reform Commission, Zhang Ping, reiterating that housing prices in some cities remained too high, suggesting no let up in measures to cool the market. No new steps were announced, however.

The dollar was range-bound against other currencies, fetching 84.34 yen in Tokyo morning trade, hardly changed from New York late Thursday.

The euro fell to $1.2693 from $1.2720 in New York and to 107.07 yen from 107.35 yen.

Oil prices dipped below $73 as concerns about weak US economic data pervaded crude markets, analysts said.

New York's main contract, light sweet crude for October delivery, fell 37 cents to $72.99 per barrel. Brent North Sea crude for delivery in October shed 33 cents to $74.69.

Gold opened at $1,235.80-$1,236.80 an ounce, down from Thursday's closing price of $1,241.50-$1,242.50.

Saturday, August 28, 2010

US woes weigh on Asian stock markets

HONG KONG - A fresh batch of disappointing figures from the US and losses on Wall Street sent Asian markets tumbling on Friday.

And the dollar remained under pressure from the yen amid uncertainty over the global outlook and as dealers awaited measures from Tokyo aimed at reining in the Japanese unit.

Tokyo's Nikkei fell 1.96 percent, or 183.30 points, to 9,179.38 as exporters were hit by the yen's stubborn strength. Sydney fell 1.07 percent, or 48.1 points, to 4,430.9 and Hong Kong lost 0.43 percent, or 90.64 points, to end at 20,981.82.

Shanghai was 1.70 percent off, shedding 45.67 points to finish on 2,642.31.

The US announced on Thursday a new set of data that stoked growing concerns about the recovery in the world's biggest economy amid fears of a double-dip recession.

The Labor Department said the number of Americans filing new weekly claims for jobless benefits jumped unexpectedly to 500,000, the highest in nine months and against forecasts of a small improvement.

It was the third straight week in which claims have risen, and underscores the threat posed by unemployment to the recovery. US unemployment hit 9.5 percent in July.

The glum figures were compounded after the Federal Reserve of Philadelphia said manufacturing activity in the mid-Atlantic region had dropped in August.

Wall Street reacted badly, with the Dow falling 1.39 percent and Nasdaq 1.66 percent off.

Thursday's announcements added to an already downbeat outlook for the US.

Already this month the Federal Reserve has forecast the economy will take longer to recover than originally expected, while manufacturing data have also disappointed.

The dollar remained under pressure as investors look for protection against risk by buying the yen.

The dollar, which hit a 15-year low of 84.73 yen last week, was at 85.28 yen in Tokyo afternoon trade, from 85.38 in New York Thursday.

Currency dealers have been waiting anxiously for measures by Japan to halt the yen's rise and give a much-needed fillip to the stuttering economy.

Bank of Japan chief Masaaki Shirakawa is due to meet Prime Minister Naoto Kan on Monday to discuss stimulus for the economy and ways to brake the yen's advances.

"We are hearing rumors that the BoJ may hold an emergency meeting," said Yuji Saito, forex analyst at Credit Agricole.

"Market players are looking to possible moves by the Bank of Japan," he said.

Shinichiro Matsushita, market analyst at Daiwa Securities, told Dow Jones Newswires: "The market is increasingly concerned about the yen's rise and has priced in hopes that the BOJ will have an emergency meeting soon."

The euro slipped to $1.2798 from $1.2821 and to 109.20 yen from 109.47 in New York.

Economic uncertainty led risk-averse dealers into safe haven gold, which opened at $1,231.00-$1,232.00 an ounce, up from Thursday's closing price of $1,229.50-$1,230.50.

Oil was higher, with New York's main contract, light sweet crude for delivery in September, up 14 cents to $74.57 a barrel in morning trade.

Brent North Sea crude for October delivery advanced 24 cents to $75.54.

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