What to expect from Apple's upcoming earnings

Apple will report its 2nd fiscal quarter earnings on Tuesday at 4:30 P.M.

This quarter is typically Apple’s slowest. Apple sells a lot of iPhones during the holiday season and much fewer in the first calendar quarter of the year.

But investors will still be looking for slight annual growth, as well as any sign that Apple expects the redesigned iPhone coming out this fall to be a hit.

On the other hand, the historically strong dollar caps Apple’s earnings upside.

Here’s what Wall Street expects from Apple’s key earnings figures, via Bloomberg:

Q2 EPS: $US2.022, up 5.9% year-over-year

Q2 revenue: $US53.079 billion, up 4.9% year-over-year.

Gross margin: 38.711%

iPhone unit sales: 52.21 million (compiled by Philip Elmer-DeWitt)

Apple forecasts between $US51.5 billion and $US53.5 billion in sales in this quarter. Ultimately, 39 analysts rate Apple stock as a “buy,” 9 rate it as a hold, and only one says to sell, according to Bloomberg.

Here are some key questions that analysts want answered:

How does Apple see the upcoming iPhone “Super Cycle?”

Wall Street analysts believe there is a built-up audience of iPhone owners who have been waiting for a new model to upgrade. So if the iPhone launched this fall is impressive, it could spur a “Super Cycle” of sales.

Analysts want to hear if Apple CEO Tim Cook or CFO Luca Maestri give any perspective on whether Apple sees this as a real possibility or how the company is preparing for substantial demand.

“Over the course of the next year, we continue to believe that an iPhone 8 Super Cycle (starting with 3 models, one of which will be OLED) should drive up replacement rates and drive new customers,” Credit Suisse analyst Kulbinder Garcha wrote in a note last week.

Will Apple increase dividends?

Apple’s 2nd fiscal quarter is when Apple usually discusses its capital return program.

Apple had $US246.1 billion in cash and marketable securities and $US87.5 billion in debt at the end of last quarter, according to Drexel Hamilton analyst Brian White.

“Exiting [the holiday quarter], Apple had used nearly $US201 billion of the $US250 billion that is targeted to be returned to shareholders by March 2018,” White writes.

Aside from Apple’s annual capital return update, some analysts will want to hear what Apple would do if there is corporate tax reform and it can repatriate some of the $US230 billion or more it has overseas.

“Potential catalysts for Apple during 2017 include a falling corporate tax rate and repatriation of over $US200B from cash balances offshore,” Needham analyst Laura Martin wrote last week.

Is the iPhone 7 selling well?

Last year, Apple reported three straight quarters of sales declines before returning to growth in the holiday quarter.

Is Apple going to shrink during the spring and summer this year ahead of the “Super Cycle?” Wall Street expects sales to be up almost 5%, but there are some analysts that are raising the possibility that this could be a relatively soft quarter even if Apple does grow on a year-on-year basis.

“As it relates to Apple, we suspect U.S. sell through trends have weakened,” Raymond James analysts wrote last week. “We … expect a more muted outlook overall for the next two quarters. However, we suspect Apple’s shares are largely discounting sluggish near term U.S. trends as investors look forward to the next iPhone launches this fall.”

How much are iCloud and Apple Music contributing to total revenue?

Apple’s services business, which includes Apple Music, iCloud, and AppleCare warranties, is expected to report revenue of $US6.9 billion, estimates Martin.

That’s almost as many sales as a Fortune 500 company reports in a quarter. Investors want Apple to demonstrate that it can make money off of Apple users in addition to selling premium computers and phones.

“This continued expansion of Service’s contribution to Apple’s business has resulted in a higher quality, annuity type business. We believe as this business continues to grow, the stock could continue to rerate as a result. Current stock price has reflected the upcoming iPhone cycle to some extent,” Credit Suisse analysts recently wrote.

Business Insider will be covering Apple’s quarterly earnings live on Tuesday afternoon.

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