Article / 22 January 2016 at 14:15 GMT

Earnings Watch: Most pivotal Apple earnings in years

Head of Equity Strategy / Saxo Bank
Denmark
  • Next week will be the first busy one of this year's earnings season
  • 234 companies of the S&P 1200 Global index report, Apple is the most important one
  • Analysts are expecting revenue and EPS to grow
  • The news flow for Apple though is negative
  • Fundamentals though are still phenomenal 
  • Mc Donald's, Siemens, Eli Lilly and Sony are others to report next week 

Apple
The newsflow is negative, but fundamentals are still very good for Apple. Photo: iStock 

By Peter Garnry

The earnings season enters its first busy week starting on Monday with 234 companies of the S&P 1200 Global index reporting. We are getting enough earnings data to begin making some preliminary conclusions on the US earnings season but we will save them for another post. Today we will focus on Apple, due with earnings on Tuesday, January 26.

Could sales growth turn negative?

Apple reports FY16 Q1 results (ending 2015-12-31) on Tuesday with analysts expecting revenue of $76.6 billion and EPS $3.23 - up 2.7% and 5.6% y/y respectively. However, the recent weakness in the share price is driven by uncertainty over demand given key suppliers are scaling back production and laying off people. Given this news it could very well be that analysts are too optimistic and Apple will miss on revenue. 

In addition the latest product announcements have not stirred a lot of enthusiasms and the Apple Watch has not gained momentum according to channel checks. Given the negative news flow and the negative momentum in the share price we have been short the stock since January 6.

Apple weekly share price since 2011
Apple share price

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


Having said that, the fundamentals of Apple are still phenomenal. No doubt about that. Their 12-month trailing operating cash flow to total assets excluding excess cash and securities is around 70%, which is still by far the highest observed among large and mega caps in the US and Europe. In that light Apple is still a high quality company and that alone warrants a higher share price and valuation. But for now the news flow is dominating the path of Apple's share price.

Besides Apple's earnings on Tuesday, next week's most important earnings releases are...


Tuesday: Siemens, Sumitomo Mitsui Financial, Hyundai Motor, Philips, Apple, Johnson & Johnson, AT&T, P&G, 3M, Lockheed Martin, Du Pont

Wednesday: Novartis, Banco Santander, Canon, Facebook, Boeing, United Technologies, Qualcomm, Biogen, Texas Instruments, EMC, PayPal, eBay

Thursday: Roche Holding, Deutsche Bank, Diageo, Fanuc, Keyence, H&M, Microsoft, Visa, Amazon, Amgen, Altria, Bristol-Myers, Eli Lilly, Celgene, Abbott Laboratories, Time Warner Cable, Ford Motor, Caterpillar

Friday: Sky, NTT Docomo, Honda Motor, Sony, Mizuho Financial, Chevron, MasterCard, AbbVie, Honeywell, Colgate-Palmolive, Phillips 66

— Edited by Clemens Bomsdorf


Peter Garnry is head of equity strategy at Saxo Bank

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Earnings Watch - 2016-01-25

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