Apple's Not Letting Economy Get It Down

Apple ( AAPL) is expected to comfortably beat its revenue estimates when it reports its fiscal fourth-quarter results late Tuesday, although Wall Street will be closely monitoring the report for any signs of plummeting consumer confidence.

The last few weeks have certainly not been easy for the maker of the iPod and the Mac. Apple's shares plunged amid concern about slowing demand for PCs, and the firm's stock also took a hammering when it was falsely reported that CEO and founder Steve Jobs had suffered a heart attack.

Initial expectations at least suggest that Apple should be able to shake off its recent problems, prompting the company's shares to rally slightly on Monday. Apple shares closed up $1.04, or 1.07%, at $98.44.

Analysts are expecting fourth-quarter revenue of $8.05 billion and earnings of $1.11 a share, slightly above the company's own revenue forecast of $7.8 billion and earnings of $1 a share. The Cupertino, Calif.-based firm, is, however, notoriously conservative in its guidance, prompting at least one analyst to predict higher fourth-quarter figures.

Piper Jaffray analyst Gene Munster expects Apple, despite a tough economy, to report revenue of $8.37 billion and earnings of $1.17 a share.

"Despite the expectation for an extended consumer slowdown hitting the consumer electronics space, we believe Apple is well-positioned to weather the storm," Munster wrote in a research note maintaining Apple's buy rating. "The company has recently leveraged its unit volumes in the iPod, Mac and iPhone businesses to lower prices moderately while generally maintaining margins."

Despite rumors that Apple was significantly lowering its MacBook prices last week, the company tweaked its pricing and added a host of new features, underlining its desire to safeguard margins on its largest product line.

Apple is not the only company fighting for a share of the notebook market. Samsung, for example, is reportedly planning to re-enter the U.S. computer market with the introduction of new ultralight notebooks. Other firms in this niche include Dell ( DELL), HP ( HPQ), and Lenovo, which all offer mini-laptops for $500 and less.

Macs represented more than half of Apple's third-quarter revenues, and the indications are that sales remain solid. Munster pointed to figures from market research firm NPD, which suggest that Apple's fourth-quarter Mac sales were up 28% year over year, compared to Wall Street's estimate of 25%.

NPD also estimates that Apple shipped between 2.7 million and 2.8 million Macs during its fourth quarter, slightly up on the 2.5 million sold during the third quarter. Wall Street is expecting Mac sales around 2.7 million.

As for iPods, NPD expects Apple to ship 11 million units in the fourth quarter, slightly above consensus estimates of 10.8 million. "Given concerns regarding iPod weakness, we believe the segment's outperformance relative to Street expectations is a positive," wrote Munster.

Expectations are also high for Apple's iPhone sales after the company introduced its 3G offering in July. After shipping a million 3G iPhones just three days after its launch, Apple is expected to report fourth-quarter sales of between 4.5 million and 5 million devices.

Even a solid fourth quarter, however, will not insulate Apple from the winds of uncertainty that continue to sweep through economy, according to Morgan Keegan.

"We now expect global PC and handset growth will post flat to low single-digit year-over-year growth over the next two quarters," wrote Morgan Keegan analyst Tavis McCourt in a note Monday, adding that Apple will grow faster than both industries.

Morgan Keegan maintained its market perform rating on Apple, but lowered its 2009 revenue growth estimate from 27% to 17% and its 2009 EPS estimate from $7.26 to $5.40.

"Apple will likely continue to take share through a global economic slowdown, but its growth rate will almost certainly have to come down as consumer spending decline," wrote McCourt.

"Like most stocks in our coverage universe, we have no doubt that once the equity market recovers to more normalized valuations, Apple's share price will appreciate substantially from current levels."

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