CHICAGO, April 20, 2011 /PRNewswire/ -- Zacks.com
announces the list of stocks featured in the Analyst Blog. Every
day the Zacks Equity Research analysts discuss the latest news and
events impacting stocks and the financial markets. Stocks recently
featured in the blog include: Apple Inc. (Nasdaq: AAPL),
Hewlett Packard Co. (NYSE: HPQ), Dell Inc. (Nasdaq:
DELL), AT&T Inc. (NYSE: T) and Google Inc.'s
(Nasdaq: GOOG)
(Logo: http://photos.prnewswire.com/prnh/20101027/ZIRLOGO)
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Here are highlights from Tuesday's Analyst Blog:
Earnings Preview: Apple, Inc.
Apple Inc. (Nasdaq: AAPL) is expected to release its
second quarter 2011 results after the market closes on April 20, 2011. We believe that Apple will
continue to record above-market gains, exceeding the Zacks
Consensus Estimate.
At its first quarter conference call, Apple forecasted second
quarter earnings of $4.90 per share
compared with $3.33 in the year-ago
quarter. We should, however, take into account the company's
history of conservatism while looking at their current
guidance.
The Zacks Consensus Estimate for the second quarter of 2011 is
pegged at $5.34 per share,
representing a year-over-year growth of 60.4.
Apple posted an average earnings surprise of 21.27% in the
trailing four quarters, implying that it has outpaced the Zacks
Consensus Estimate by the same magnitude in the last four
quarters.
Apple reported earnings per share of $6.43 per share in the first quarter of 2011,
beating the Zacks Consensus Estimate of $5.38 as well as its own guidance of $4.80 per share.
Apple posted a positive earnings surprise of 19.5% in the
reported quarter. Revenue increased 70.5% year over year to
$26.74 billion, beating the Zacks
Consensus Estimate of $24.30 billion
and its own forecast of $23.00
billion.
We are positive on Apple's earnings outlook and remain
encouraged by the fact that second quarter estimates are clearly
going up, implying that analysts see positive catalysts. The
estimate revision trends and the magnitude of such revisions
justify the strength of the stock.
Estimate Revision Trends
Specifically, 12 out of the 42 analysts raised their projections
in the last 30 days, while only one analyst moved in the opposite
direction. Over the last week, seven analysts upgraded their
estimates, whereas none made downward revisions.
Overall, estimates for the second quarter have gone up
3 cents from $5.31 per share, in the last seven days, to
$5.34 per share. There has been an
increase of 6 cents over the past 30
days and 8 cents over the past 60
days.
We believe Apple will post strong results in the second quarter,
based on solid sales of the iPad, iPhone and Macintosh.
Key Drivers
Strong Macintosh Sales – Resurgent demand for Macintosh
has been a boon for Apple in the last few quarters. Apple shipped
roughly 4.13 million Macintosh computers in the first quarter
(ended December, 2010), reflecting a 23.0% year-over-year increase,
attributable to strong demand for the product in each of its
geographic segments. Both Asia-Pacific and Japan grew over 50%, which resulted in a
double-digit growth in both desktop and portable platforms.
According to research group IDC, Macintosh sales increased 9.6%
year over year in the quarter ended March
31, 2011. Apple grabbed an 8.5% share of the U.S. personal
computer market, selling an estimated 1.375 million units in the
first quarter.
However, Apple continues to face strong competition in the PC
segment from Hewlett Packard Co. (NYSE: HPQ), which leads
the U.S market with 27.0% market share, followed by Dell
Inc.'s (Nasdaq: DELL) 12.8% and Toshiba's 10.3%.
iPad 2 launch -- In March
2011, Apple launched its much hyped tablet computer iPad2,
and according to the analysts sales could have exceeded 500,000
units over its debut weekend. Although Apple will not be able to
report iPad 2 sales for the full quarter, we believe that the
launch of iPad 2 will significantly boost its top-line numbers.
IDC expects Apple to maintain 70%–80% market share through 2011,
primarily due to the launch of iPad2. Based on IDC estimates, Apple
will ship a minimum of 35 million tablets in 2011.
iPhone – Although Apple did not provide any specific
details about the launch of iPhone 5 in the near term, we believe
continued strong sales from iPhone 4 will drive top-line growth for
the second quarter. We believe the availability of iPhone through
Verizon Wireless will drive revenue growth in the upcoming quarter
(before February, AT&T Inc. (NYSE: T) was the sole
iPhone carrier).
We believe the company is facing supply chain problems both for
both its iPhone and iPad and the natural disaster in Japan has aggravated the situation.
Apple imports a number of manufacturing components from
Japan for its iPad 2. Global
supplies of NAND and DRAM, essential for smartphones such as
iPhone, have also been affected by production shutdowns in
Japan, which is a significant
supplier of these memory chips. We believe the supply chain problem
will hurt the company's profitability in the near term.
Absence of Steve Jobs --
Apple's founder Steve Jobs took a
medical leave in early January for an indefinite period of time.
This is the third time that he has taken a medical leave since
2004.
Although his absence is not expected to have any significant
impact in the near term, it will be interesting to see how the
make-shift management responds to the growing demands of the
industry. We believe it will be challenging for Apple to maintain
its dominant position in the industry once its founder steps
down.
Recommendation
We maintain our Outperform rating over the long term (6-12
months). We believe Apple is well positioned to achieve strong
top-line growth over the long term based on product innovation,
strong sales from iPad and iPhone and higher Macintosh sales.
Apple remains embroiled in legal battles over its mobile
products. Apple is engaged in legal battle with Taiwanese handset
maker HTC, regarding the violation of numerous patents in
March 2010. HTC manufactures several
phones powered by Google Inc.'s (Nasdaq: GOOG) Android
mobile operating system.
Moreover, Apple's share price has declined 2.6% since the
release of first quarter 2011 results. We believe persistent supply
chain problems led to such a scenario.
Currently, Apple has a Zacks #3 Rank, which implies a Hold
rating in the short term (1-3 months).
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