Earnings season is approaching and many investors are watching for how the world’s largest company, Apple Inc. (NASDAQ: AAPL), performed. Apple is set to report its earnings in late October 2016 and some investors may want to engage in share trading in this mega cap name. Apple iPhone sales will be one number that investors are watching, which gives them an idea on whether some consumers still favor this operating system over Android.
However, news was recently released in late August 2016 regarding Apple’s taxes. European Union (E.U.) antitrust regulators ordered Apple to pay up to $14.5 billion in back taxes and interest on the taxes to the Irish government. Competition Commission Margrethe Vestager said, “Ireland granted illegal tax benefits to Apple, which enabled it to pay substantially less tax than other businesses over many years.”
However, the amount that Apple is ordered to pay is just a small portion of its cash and cash equivalents, and short-term and long-term investments. Moreover, the Republic of Ireland agreed to file an appeal against the European Commission’s ruling. Consequently, Apple may not even have to pay the amount of taxes owed and this news should not affect its earnings over the short term.
On July 26, 2016, Apple reported its earnings results for the third quarter ended on June 25, 2016. Apple reported quarterly revenue of $42.4 billion and a quarterly net income of $7.8 billion, or $1.42 per diluted share. However, this was a decrease from its 2015 third quarter earnings results. During the third quarter of 2015, the company reported revenue of $49.6 billion and net income of $10.7 billion, or $1.85 per diluted share.
Apple CEO Tim Cook said, “We are pleased to report third quarter results that reflect stronger customer demand and business performance than we anticipated at the start of the quarter … We had a very successful launch of iPhone SE and we’re thrilled by customers’ and developers’ response to software and services we previewed at WWDC in June.” These statements exuded the CEO’s confidence in the company’s ability to expand and generate strong earnings.
Additionally, Apple’s CFO noted, “Our Services business grew 19 percent year-over-year and App Store revenue was the highest ever, as our installed base continued to grow and transacting customers hit an all-time record … We returned over $13 billion to investors through share repurchases and dividends, and we have now completed almost $177 billion of our $250 billion capital return program.” Since Apple returned over $13 billion to investors during the quarter, it showed strength in the company’s earnings.
Apple Fourth Quarter Earnings Forecast
During its fiscal fourth quarter of 2016, Apple expects to report revenue between $45.5 billion and $47.5 billion. Moreover, gross margin is expected to be between 37.5% and 38%. Wall Street analysts are expecting an earnings per share (EPS) of $1.64, the estimates range from $1.57 to $1.71 per share. Moreover, the consensus estimate for the company’s quarterly revenue is $46.7 billion, with estimates ranging from $45.6 billion to $47.59 billion.
Apple iPhone 7 Release
One of the major catalysts that could drive Apple’s share price and earnings during the fourth quarter ending in September 2016 is the launch of the new iPhone 7. The iPhone 7 launch is confirmed and should drive iPhone sales in 2016 and 2017. Apple is making several tweaks to the iPhone, and the new innovative phone is expected to include a dual-lens camera system and wireless headphones, which should cause photography buffs and casual users to lust over this phone.
Concerns of Apple
CEO Tim Cook recently unloaded some of his shares in Apple. In late August 2016, Cook sold over 600,000 shares of his stocks at prices ranging between $105.95 and $107.73, which generated over $60 million. Either Cook recently changed his bullish stance on Apple, or he used the proceeds to donate to causes or to make purchases for his family. This is all speculation, but it does have some investors guessing. Investors will just have to wait and see his stance and the company’s fiscal 2016 fourth quarter performance to make an informative decision on whether they should engage in share trading or not.