Apple (AAPL) To Report Q2 Earnings: Is A Beat In Store?

Apple, Inc. (NASDAQ:AAPL) is set to report its second-quarter fiscal 2017 results on May 2. Last quarter, it posted a 4.35% positive earnings surprise. The company has outperformed the Zacks Consensus Estimate in three of the last four quarters, with an average positive earnings surprise of 0.89%.

Let’s see how things are shaping up prior to the announcement.

Earnings Whispers

Our proven model shows that Apple is likely to beat earnings because it has the right combination of the two key ingredients. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen.

Zacks ESP: Apple currently has an Earnings ESP of +1.00%. This is because the Most Accurate estimate is $2.03 while the Zacks Consensus Estimate is pegged at $2.01. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Apple has a Zacks Rank #3. This combined with the company’s Earnings ESP of +1.00%, makes us confident in looking for an earnings beat this quarter.

We caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Apple Inc. Price and EPS Surprise

Apple Inc. Price and EPS Surprise | Apple Inc. Quote

Factors to Consider

Apple’s revenues got a boost due to increase in iPhone demand caused by the launch of iPhone 7 and 7 Plus. Also, “Services” revenues, which include App store, Apple Music and Apple Pay have registered impressive growth. Investors will be more interested in the second half of the year. This is because Apple will be launching its mega edition, iPhone 8 around that time.

iPhone 8 is set to be launched to mark the tenth anniversary of the revolutionary iPhone. It is reported to have amazing features like a glass body, a dual-curved edge-to-edge OLED display with a built-in Touch ID sensor and wireless charging. iPhone 8 is already dubbed as a “super cycle”.

Meanwhile Apple remains focused on finding newer growth avenues. It is also working on developing technologies such as artificial intelligence (AI) and augmented reality/ virtual reality (AR/VR), which are fast emerging as lucrative business opportunities. The company’s interest in the autonomous car project is understandable as it is now being labeled as a big business opportunity. Apple also remains focused on increasing its market share in India.

Over the past one year, shares of Apple have registered growth of 53.39% compared with the Zacks categorized Computer Mini industry’s gain of 52.18%.

Despite these, Apple continues to face a plethora of challenges. Competition from local players has been hindering iPhone growth in China. In the last reported quarter, Owing to persistent macroeconomic weakness, Apple revenues declined around 12% year over year in the Greater China region to $16.2 billion.

For the second quarter of fiscal 2017, Apple forecasts revenues in a range of $51.5–$53.5 billion. Gross margin is expected within 38–39%, while operating expenses are projected within $6.5–$6.6 billion.

Stocks to Consider

Here are a couple of stocks worth considering that, as per our model, have the right combination of elements to post an earnings beat this quarter:

AMTEK Inc. (NYSE:AME) has an Earnings ESP of +1.79% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Exelixis, Inc. (NASDAQ:EXEL) has an Earnings ESP of +100.00% and a Zacks Rank #3.

GoDaddy Inc. (NYSE:GDDY) with an Earnings ESP of +125.00% and a Zacks Rank #3

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