Article / 23 October 2015 at 10:10 GMT

Earnings Watch: China should support Apple growth

Head of Equity Strategy / Saxo Bank
  • Almost a third of the S&P 1200 Global companies are to report next week
  • Apple is due on Tuesday and expectations are high
  • Seeing the growth potential, the US tech giant is undervalued
  • Growth is to come from China - also in the future

By Peter Garnry

With 368 companies reporting earnings in the S&P 1200 Global Index next week the Q3 earnings season will see enters its busiest week. The number is staggering and clearly we cannot cover it fully here. Instead we will go into details on Apple's earnings.

China can lift valuation

Apple reports FY15 Q4 earnings on Tuesday October 27 after US market close. Analysts expect EPS $1.88 up 33% y/y and revenue $51 billion up 21% y/y. EPS estimates are up 3% in the last six months as analysts have revised up there numbers on better than expected performance in China driven by CEO Tim Cook's comments a couple of weeks ago. The share price is up 6% YTD relative to flat performance in S&P 500. 

Apple weekly share price since early 2009
Apple share price

Source: Saxo Bank. Create your own charts with Saxo Trader click here to learn more

The current flow of information from the supply chain and retailers do not suggest any slowdown in demand for iPhones which accounted for 63% of revenue in the previous quarter. Focus will be on China that accounted for 27% of revenue in the previous quarter, up from 17% a year ago as the business in China doubled. Tim Cook has recently been out saying that demand is still strong in China and as such this is where growth will come from over the coming years.

Based on expected profits in 2016 of $54.3bn and the current market value excluding cash the stock trades at FY16 forward P/E of 8.4x which is too low given product portfolio, growth rates, operating margins etc. Even with a conservative forward P/E 11x the upside is 31%

Apple is still on our top 20 alpha picks list in the mega cap segment and as such we believe there is an upside potential in the stock over the earnings release.

The most important earnings next week are...

Monday: Luxottica 

Tuesday: Novartis, BP, Canon, Wal-mart de Mexico, Apple, Pfizer, Gilead Sciences, Comcast, Merck, Bristol-Myers, UPS, Ford Motor

Wednesday: National Australia Bank, China Life Insurance, Volkswagen, Linde, GlaxoSmithKline, Lloyds Banking Group, Statoil, Heineken, Telenor, Amgen, Walgreens, Mondelez, Occidental Petroleum

Thursday: ANZ, Banco Bradesco, Suncor Energy, Swiss Re, PetroChina, China Construction Bank, China Petroleum, Bayer, Deutsche Bank, Novo Nordisk, Danske Bank, Banco Santander, Nokia, Sanofi, Total, Barclays, BT Group, Eni, Sony, Panasonic, Royal Dutch Shell, Altria Group, MasterCard, Starbucks, ConocoPhillips, Time Warner Cable

Friday: Anheuser-Busch, Ambev, ICBC, BBVA, BNP Paribas, Airbus Group, RBS, BP Group, NTT DOMOCO, Exxon Mobil, Chevron, CVS Health, AbbVie, Colgate-Palmolive, Phillips 66

All of next week's earnings can be found in the attached PDF.

Download document

Earnings Watch - 2015-10-26


The Saxo Bank Group entities each provide execution-only service and access to permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on or as a result of the use of the Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. When trading through your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of ourtrading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws. Please read our disclaimers:
- Notification on Non-Independent Invetment Research
- Full disclaimer

Check your inbox for a mail from us to fully activate your profile. No mail? Have us re-send your verification mail