Apple earnings today: Preview

Just after the launch of the very-successful iPhone 5S and the not-quite-as-hot iPhone 5C, Apple told analysts to expect $36-37 billion in revenue and perhaps $7 billion in profit for its fourth quarter of 2013.

Even if it beats those numbers, this would a quarter to forget.

Those billions in revenue and profit will likely come as a result of perhaps 33 to 36 million iPhones, and maybe 14.5 million iPads. iPhones and iPads account for the vast majority of Apple’s revenue, with Mac sales generally around four million units and iPod growing more and more insignificant by quarter.

All of those numbers are just slightly up from the same quarter last year, meaning growth this quarter — and this year — has been anemic at best. That’s partly due to that fact that Apple’s new iPhones were only on the market for 10 days of this quarter, and Apple’s new iPads only hit this market this Friday.

Still, Apple has some good news.

“We are raising our revenue estimate to $37.49 billion from $34.57 billion and increasing our EPS projection to $8.06 from $7.23,” Apple analyst Brian White of Cantor Fitzgerald said in a research note today.

Above: Apple’s 2013 stock performance.

Image Credit: Google Finance

That’s a good sign, and there are good indications of strong iPhone sales. In addition, the new iPads that Apple announced —   including the iPad Air which will hit the market this Friday (look for our review) and a new retina iPad Mini — will help Apple restore some of the luster to its tablet sales.

But most of that benefit will come next quarter in Q1 2014.

Apple stock has actually done fairly well in 2013, given that it dropped to a trough of $390 in late April. Shares are now trading in the neighborhood of $525, down about 1 percent from the beginning of the year, and are up $2.50 today as investors anticipate good news — or at least not bad news — in advance of this afternoon’s earnings announcements.

One big concern with Apple is declining margin as the smartphone and tablet markets continue to mature. For the past three consecutive quarters, Apple has seen its earnings per share decrease on a year-over-year basis. That’s partly due to a breakout 2012 fiscal year, and partly due to increased competitive pressure from Android, but if Apple cannot reverse the trend, it will see an entire year of declines.

That will change, according to White:

“After a year to forget in 2013 … we expect earnings per share growth to return in 2014 for a year that we believe will prove to be one of innovation.”

If that doesn’t happen, Apple may need to look to activist investor Carl Icahn’s plan for Apple to buy back $150 billion of Apple stock in order to make AAPL trend up.