Apple Revenues Up by 31% in Q2
Apple’s scheduled release of actual numbers for earnings and revenues today is likely to paint lively pictures of growth in the Information Technology (IT) sector, largely driven by the sales of iPhone and iPad.
Apple currently dominates both earnings and revenue growth for the IT sector, which has the third highest earnings growth rate (5.4%) and the second highest sales growth rate (6.1%) of all ten sectors in the S&P 500.
The company is projected to report $10.38 in terms of EPS, up by 33% compared to year-ago actual EPS of $7.79. In terms of revenues, the company is predicted to report $37.5 billion, which reflects growth of 31% relative to year-ago actual sales of $28.6 billion.
In Q1 2012, Apple reported sales of $39.2 billion, reflecting 59% growth year-over-year. At the product segment level, the iPhone largely contributed to sales growth for the quarter with reported revenues of $22.7 billion, up 85% year-over-year. Over the past six quarters, the iPhone product segment has reported the largest average revenue surprise of all eight product segments at 13.3%. This segment has reported sales above estimates in five of the past six quarters.
In addition, the actual sales number of $22.7 billion was 16.1% above the sales estimate of $19.5 billion. This was the highest upside revenue surprise compared to the mean estimate for any product segment for the quarter.
Based on current estimates, the iPhone and iPad product segments are again the major drivers of sales growth for Apple in Q2 2012. The iPhone product segment is projected to report revenue of $18.9 billion, which reflects growth of 42% compared to year-ago sales of $13.3 billion. The iPad product segment is predicted to report revenue of $8.8 billion, which reflects growth of 45% relative to year-ago sales of $6.0 billion. The iPad product segment has the second lowest average revenue surprise at 0.8%. This segment has reported sales above estimates in just three of the past six quarters.
Combined, these two product segments account for 93% of the expected dollar-level revenue growth for Apple in Q2 2012.
However, while the current Q2 2012 estimate for iPad sales represents a 32% increase when compared to Q1 2012 (on a sequential basis), the current Q2 2012 estimate for sales for the iPhone is 16% lower than the figure in Q1 2012 (on a sequential basis).
But will the iPhone segment report a higher upside revenue surprise in Q2 compared to the 16.1% revenue surprise reported in Q1?
FactSet, which combines integrated financial information, analytical applications, and client service, commented: “It is difficult to predict if a product segment (or company overall) will eport an upside surprise at all in any given quarter. However, it is interesting to note that the IPhone product segment has reported upside surprises higher than 16.1% in three of the past six quarters (Q4 2011, Q2 2011, and Q1 2011).”
So while the iPhone product segment is still the key driver of revenue growth for Apple in Q2 2012, it is expected to report lower overall revenues ($18.9 billion vs. $22.7 billion) and lower year-over-year revenue growth (42% vs. 85%) compared to Q1 2012.
However, the product segment has reported the highest average upside surprises to revenue estimates over the past 18 months. In both Q4 2011 (28.8%) and Q2 2011 (24.0%), the iPhone product segment reported upsides surprises that exceeded 20%. If the segment reported an upside revenue surprise slightly above 20% (20.3% or higher) again for Q2 2012, revenues for the segment and Apple as a whole would show an increase on a sequential basis relative to Q1 2012.
Over the past five years, Apple has reported actual sales above estimated sales in 18 of the past 20 quarters. During this time, the average revenue surprise (difference between actual sales and estimated sales) has been 6.6%.
Over the past 18 months, Apples has reported actual sales above estimated sales in five of the past six quarters. The average revenue surprise (difference between actual sales and estimated sales) has been 8.1% during this time frame.
Given Apple’s large expected contribution to the overall revenue growth rate for the entire Information Technology, any upside revenue surprise from Apple will increase the overall expected revenue growth rate for the sector as a whole.