Apple Q2 2015 Earnings Preview: Another Strong Quarter Driven By iPhone In China

April 25, 2015 3:35 PM

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Apple (NASDAQ:AAPL) will likely report a 2Q15 beat to consensus EPS of $2.14 this coming Monday on strong revenue growth (up 24% from last year) and margin trends (41.0% vs. 39.3% last year). The iPhone will be the primary focus as investors look for any indication of continued above average sales trends compared to previous iPhone cycles. While recent iPhone sales share in the U.S. and Europe appear slightly ahead of previous years, strong sales in China will be the primary driver behind 35% growth in iPhone unit sales. In addition to earnings, Apple is expected to announce an updated capital return program. The Mac and iPad are becoming less of a factor for earnings as those two product categories now represent a smaller percentage of Apple's overall business. It will be difficult to get Apple Watch sales expectations from guidance, but management may give commentary on how the Watch launch is proceeding. Similar to last quarter, the impact from a strong dollar will be reflected in management's revenue and margin guidance for 3Q15.

Representing close to 70% of Apple's quarterly revenue and 80% of gross profit, the iPhone will likely remain the primary focus for Apple investors until new Apple products gain enough momentum to account for a bigger piece of the financial pie. While there is nothing inherently wrong with this situ...

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