Apple will release its earnings report for the fiscal second quarter of 2022 on Thursday, April 28. As usual, the company will release its Q2 2022 earnings report then hold a conference call with investors and analysts to provide more details about the results.
Apple shares have fared better than peers this year, falling 5.7% versus the 12.9% drop of the tech-heavy Nasdaq 100 index.Apple stock nearly touched the $3 trillion mark again as recently as March 29. But since then, the share price has tumbled almost $14 apiece very quickly, to around $165. Apple is now 9% below all-time highs, a step away from entering correction territory.
Last Quarter Review
Last quarter, Apple reported a revenue record of $123.95 billion, up 11% year over year. The company reported profit of $34.6 billion and earnings per share of $2.10. It’s important to note that Apple itself had warned that it would be negatively impacted by supply constraints during the holiday quarter, but it appears to have weathered that storm quite well.
Apple did not provide any official guidance for Q2 2022 due to uncertainty caused by manufacturing disruptions and the COVID-19 pandemic. However, Apple CFO Luca Maestri said in January that the“very strong customer response to our recent launch of new products and services drove double-digit growth in revenue and earnings.”
Apple Faces Tough Comps
It will be hard for CEO Tim Cook and his team to impress analysts and investors this time. This is the case because Apple will face very tough comparisons against fiscal 2021 results that were outstanding. See quarterly revenue growth chart below.
The nearly 54% revenue increase delivered this time last year was driven, first and foremost, by 5G-equipped iPhones that were introduced late in 2020. Due to delays in the launch of the new device, quite a bit of smartphone shipments were shifted from the holiday period to fiscal Q2.
The story did not end there, however. Mac and iPad sales increased by an impressive 70%-plus each. Both product categories benefited from the tail end of the pandemic-era lockdowns, as well as a hybrid-style return to office that boosted demand for PCs and tablets.
None of the factors above will be in place this time—although smartphones may still see strength coming from a well-received iPhone 13 and the recent launch of the 5G version of the less expensive iPhone SE.
Stock Buybacks
In a note published on April 12, Citigroup Inc. analyst Jim Suva estimated that the iPhone maker might announce a buyback of $80 billion to $90 billion, while also increasing its dividend by 5% to 10%. All eyes will be on its second-quarter results due after the closing bell on April 28.
With their coffers filling fast, companies including Alphabet Inc. and Microsoft Corp. have been looking for ways to employ excess cash. Apple’s repurchases have totalled $274.5 billion, including $20.4 billion in the December quarter alone. Yet the company still has cash of more than $200 billion on the balance sheet, and with authorization to purchase up to $315 billion of stock, has scope to do a lot more.
“We expect Apple to add as much as $300 billion to share repurchases following 2Q results as availability wanes in its existing program,”Robert Schiffman, Bloomberg Intelligence senior credit analyst, wrote in a report last week, noting that the company historically reloads the repurchase program following the second quarter.
The Cupertino-California-based company had increased its buyback program by $90 billion and hiked its dividend by 7% last April, along with its announcement of second-quarter results.
What Wall Street Expects to See Instead
Only because the first calendar quarter of 2022 will not be as good as last year’s, it does not mean that Apple’s results will be disastrous.
According to Yahoo Finance, analysts believe that revenues in fiscal Q2 will reach $94 billion, which would represent a respectable growth pace of 5% YOY. Not impressed? The annualized two-year growth rate, in this case, would be a sizable 27%.
On earnings per share, the consensus estimate is for $1.43. The bottom-line growth here would be a much tamer 2% to 3% YOY, but an astounding 50% compounded over the past two years.
Clearly, Apple is expected to perform well in fiscal Q2 regardless of whether the COVID-19 consumption tailwinds have largely subsided. However, the pandemic may have a negative impact on results due to supply chain constraints that could limit product availability and pressure margins.