Estimating Fourth Quarter Earnings for Apple

We expect revenue to be about $18 billion compared to $12.2 billion in the September quarter last year. We expect gross margins to be about 35%…

We are targeting EPS of about $3.44.

via Apple Inc. AAPL Q3 2010 Earnings Call Transcript.

That $18 billion figure is extraordinary.  Consider that last year during the same quarter, the company received $12.2 billion, then the sales growth forecast is about 50%.  Granted that even though Apple just achieved 61% sales growth last quarter, Apple management is unusually aggressive in underestimating.

Given this, I am looking at the following forecast:

  • iPhone units: 12.2 million (65% growth)
  • Macs: 4 million (30% growth)
  • iPads: 3.3 million (flat sequentially, production constrained)
  • iPods: 9.4 million (-8% growth)
  • Music growth: 26.7%
  • Peripherals growth: 21%
  • Software growth: 8%
  • Total sales: $19.0 billion (56% y/y growth)
  • GM: 42.3%
  • EPS: $4.78 (73% y/y growth)

If this estimate proves correct, then at the end of the quarter (Oct 1) the trailing twelve months’ earnings per share will be $15.29.  That is equivalent to P/E of 16.82 on the back of four quarters of earnings growth (47%, 86%, 75% and 73% respectively).  The price/earnings excluding cash would be 13.4.

  • We're pretty much in agreement except for iPads (I do see them constrained but them continuing to ramp up production) and GM (I'm going with 38.2%). I'd love to hear Peter Oppenheimer explain a 730 bps GM upside to his guidance. 🙂

    • I completely ignore the GM guidance. It's so far off and so absurdly defended that it seems to me that it has no bearing at all on what actually happens. I would agree the GM I have may be high (I tend to overestimate it). It also depends on product mix at the end. If, as you suggest, the iPad mix is higher, then overall GM will fall since we've gotten a very good idea of what iPad's margins are (33% vs. 60% for the iPhone). I will play with this a few more times but I don't expect EPS to come in below 4.50 at this point.

  • JeffI

    I thought the iPad was already damped up to over 2 million per month? Forecast should be 6 million or higher. Right?

    • There are rumors…I will update these figures when there is more evidence.

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