Apple earnings likely to show solid iPhone results, update on capital return
nayuki
Apple (NASDAQ:AAPL) is set to report fiscal second-quarter results on May 4, when Wall Street analysts are expecting solid results, especially out of the iPhone, and an update on its capital return program. 
"We remain positive on the long-term eco-system benefits, strong free cash flow and capital returns, and are raising our target modestly," Baird analyst William Power, who rates Apple (AAPL) outperform, wrote in an investor note.
For the second-quarter, Power expects Apple (AAPL) to generate $1.41 per share in earnings and $92.1B in revenue, including $47.9B from the iPhone. 
In addition, Apple (AAPL) is expected to update its capital return policy, with Power expecting it to "mirror" recent years updates, including a higher buyback and "slightly higher" dividend.
Power noted that Apple (AAPL) is currently trading at 27.8 times 2023 estimated earnings and 26.3 times 2024 estimated earnings, while the S&P 500 is trading at roughly 19 times estimated earnings. This is the highest premium relative to the S&P 500 since 2020.
J.P. Morgan analyst Samik Chatterjee, who has an overweight rating on Apple (AAPL) said there is a "divergence" of the earnings print compared to estimate changes and the share price, given there is "fundamental weakness" in hardware. 
"We see the combination of downside to revenue earnings being limited despite being in a tough macro; dividend and buyback support to total return as well as earnings growth; and AAPL shares trading at 26x NTM P/E, within the recent trading range of 22x-30x, and below the peak multiple of 30x, reinforcing that valuations still have room despite outperformance of the shares [year-to-date], all supporting a positive outcome for the share price that diverges from the estimate revisions expected coming out of the print," Chatterjee wrote.
For the quarter, Chatterjee expects better iPhone revenue thanks to channel builds after last year's inventory constraints, but guidance may be an issue as the global economic weakness continues.
Bank of America analyst Wamsi Mohan is expecting an "inline quarter," but guidance may be weaker-than-thought as consumer spending continues to slow. 
"We see iPhone sales stable (no major supply chain cuts) with some tailwind from demand pushed from [fiscal first-quarter] to [fiscal second-quarter] given supply issues last qtr," Mohan, who has a neutral rating on the stock, wrote.
However, Mohan added that other categories, including the iPad, Mac and wearables, are slowing, suggesting consumer spending is weakening. 
A consensus of analysts expect Apple (AAPL) to earn $1.43 per share and $92.84B in revenue.
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