Can Apple's Future Plans Save It From an Earnings Implosion?

Updated from 9:48 a.m. to include thoughts from Wells Fargo analyst.

NEW YORK (TheStreet) -- Since nothing exciting will happen with Apple's (AAPL) earnings call and results, let's all agree to go home and go to sleep now. Okay?

Fat chance.

As is now the case with Apple, guidance is the key, given the company has changed its reporting methodology in the past few quarters, as it becomes a more mature tech company, and is no longer the hyper-growth company it was just a few years ago. When Apple reported fiscal first-quarter earnings, it gave second-quarter guidance, saying it expects revenue between $42 billion and $44 billion, with margins between 37% and 38%, and operating expenses between $4.3 billion and $4.4 billion, with a 26.2% tax rate.

Analysts surveyed by Thomson Reuters are expecting the Cupertino, Calif.-based Apple to report earnings of $10.18 a share on $43.53 billion in revenue, which would be a slight decline in revenue year over year, as Apple continues to promise new products and new categories.

Morgan Stanley analyst Katy Huberty (who always gets to ask the first question on the call, must be nice!) noted that demand for the iPhone was better-than-expected this quarter, noting demand for over 40 million iPhones. "Our AlphaWise smartphone tracker, which gathers sell-through data using web search analysis, indicates 40.6M unit demand for the Mar Q," Huberty wrote in the note. "This is down slightly from a reading of 42.3M for the quarter in mid-March but still above supply chain build of 38-39M, which is unchanged in the last month. Recent promotions, like those at US carriers and retailers, and product adjustments, notably the introduction of an 8GB iPhone 5c in some regions, may have stimulated demand more than expected." Based on that, she's expecting Apple to have shipped 38 million iPhones for the quarter.

Cantor Fitzgerald analyst Brian White, he of the $777 price target, noted there were weaker-than-expected seasonal trends for the fiscal second-quarter, due to "softness in the tech supply chain." As such, he's expecting a 25% sequential decline in revenue, down to $43.24 billion, but White is hopeful about the company's new products, including the next iPhone, dubbed the iPhone Air by some. "In our view, the ramp of the iPhone 6 (4.7-inch and 5.5-inch "iPhad"-like device) and iWatch in the second-half of CY:14 are more important than Apple's 2Q:FY14 performance and potentially soft 3Q:FY14 outlook," White wrote in the report. "We also expect Apple to increase its return of cash to shareholders and the stock is trading at just 7.7x (ex-cash) our CY:15 EPS projection."

Though Apple guided revenue for this quarter to between $42 billion and $44 billion, there's still a bit of an unknown, as Apple's deal with China Mobile (CHL) officially launched during the quarter, perhaps giving bulls a bit of hope that iPhone numbers may be stronger than anticipated.

Following China Mobile's announcement of annual earnings, which saw the company's first profit decline in more than a decade, the world's largest carrier said it added around 1 million iPhones in February, according to The Wall Street Journal. China Mobile's Chairman Xi Gouhua told the paper that the company, which has more than 770 million subscribers, added 1.34 million 4G users in February, and "most of them are iPhone users."

UBS analyst Steve Milunovich, who rates Apple "buy" with a $625 price target, isn't expecting much from China Mobile right away. "We expect March results a bit ahead of consensus but a mediocre June guide given apparent lack of momentum at China Mobile and in the iPad category," Milunovich wrote in a note to client. "New products should drive the story later this year and into next, including the iPhone 6 and potential new categories that are not in our estimates."

For this quarter, Milunovich is expecting Apple to generate $44 billion in revenue, with gross margins of 37.9%, earning $10.35 a share. He's expecting 37.5 million iPhones shipped, 20 million iPads and 3.9 million Macs. 

Canaccord Genuity analyst T. Michael Walkley, who rates Apple "buy" with a $600 price target, is expecting some slowing in iPhone sales, largely due to the launch of the Samsung Galaxy S5, which uses Google's (GOOG) Android operating system. "Based on our April surveys, we believe iPhone sales have slowed following the launch of the Galaxy S5 combined with global consumers delaying iPhone purchases until a new larger screen iPhone launches later this year," Walkley penned in the note. "While we anticipate new high-end Android smartphones will gain market share versus the iPhone during the June quarter, we are lowering our June quarter iPhone sell-in estimates due to our belief carriers are slowing near-term iPhone purchases due to consumers waiting for a new iPhone form factor."

Walkey also noted he believes iPhone sales have slowed in April, also due to high-end Android competition.

Since we're not going to hear anything about new products (if we did, I think I would have a heart attack), with most of Apple's new products coming in the back half of this year, according to KGI Research analyst Ming-Chi Kuo, perhaps the biggest news out of the call will be hints on what CEO Timothy D. Cook's thoughts on existing product lines, and news on the buyback. Previously, Cook said we would hear something about an updated capital return program in the March or April time frame, so this seems like a perfect way to send out CFO Peter Oppenheimer, who is leaving the company after more than 20 years.

UBS analyst Milunovich is expecting a dividend increase, as well as an additional $7 billion in buybacks added to the existing $24 billion.

In February, Cook, in an interview with The Wall Street Journal, noted Apple was aggressive in buying back its own stock, buying $14 billion worth of stock in just two weeks. Cook said Apple wanted to be "aggressive" and "opportunistic" with the repurchases, and that he was surprised by the sharp drop in shares following the company's fiscal first-quarter results.

On the last earnings call, Cook hinted that Apple was looking at mobile payments, and that was part of the thought process behind TouchID, so perhaps we will hear more about that initiative. "The mobile payments area in general is one that we've been intrigued with, and that was one of the thoughts behind Touch ID, but we're not limiting ourselves just to that," Cook said. "So I don't have anything specific to announce today, but you can tell by looking at the demographics of our customers and the amount of commerce that goes through iOS devices versus the competition that it's a big opportunity on the platform."

Given recent job listings, it doesn't sound like the plan is ready to get off the ground anytime soon, though.

Wells Fargo analyst Maynard Um, who rates shares "market perform" with a $505 to $575 price range, believes "the positives of potential near-term "s" cycle gross margin improvements and new products are balanced against potential gross margin pressure later in the year, limited amount of incremental market cap opportunity in the existing product segments, and a potential balance of power shift back to wireless operators from handset vendors."

For now, it'll all be about guidance, and whether demand for the iPhone and iPad are stable year-over-year, or perhaps a little better, as we get to product refreshes later in the year. As Walt Mossberg said yesterday, Apple is like a movie studio, churning out sequels to hit franchises right now. Yet in the back half of the year, it's important to see whether Cook is "the kind of producer who grinds out too many sequels, or the kind who brings forth an original Godfather or Spider-Man."

--Written by Chris Ciaccia in New York

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