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Word on the street is that Apple (Nasdaq: AAPL) will once again beat Wall Street soothsayers' divinations when it announces its quarterly financial results Wednesday.
"The rumor is, Apple's going to exceed expectations significantly on this call," Rob Enderle, principal analyst at the Enderle Group, told MacNewsWorld. "It's the first time I've heard this kind of buzz in a long time."
The kicker: It's the non-GAAP (Generally Accepted Accounting Principles) figures that will tell the real story.
Meanwhile, Apple is on a roll: It's hit its second-highest level in Fortune 500 rankings ever and is the eighth most profitable tech company on the list. Demand for its iPhone and iPod lines remain strong.
The Ramp-Up
Apple shares closed at US$120.50 Monday, opened at $118.95 Tuesday and closed up at $121.76. They then went up 20 cents, or 0.16 percent, to $121.96 in after-hours trading.
Average revenue estimates were $7.94 billion for this quarter and $8.26 billion for the next quarter. This represents sales growth of 5.7 percent and 10.7 percent year over year (YoY).
On average, analysts are pegging earnings per share (EPS) to be $1.09 for this quarter and $1.11 for the next quarter, ending June. Those figures represent year-over-year increases of 8.4 percent and 10.2 percent, respectively.
Expect Apple to keep on gaining steam.
"Apple's real strength comes in the later part of the year, so the June to December period will be strong," Brian Marshal, an Apple analyst at Broadpoint Am Tech, told MacNewsWorld.
The Earnings GAAP
The tricky part about analyzing Apple's financial results is that it follows two business models. One is the traditional computer vendor model, where revenue is taken into account the moment a sale is made. The other is the traditional mobile phone model, where earnings are spread out over the length of the contract.
Until recently, analysts have used the former model, which has sometimes led to underestimating Apple's performance.
Strong demand for the iPhone skewed results. During Apple's earnings call in October, Apple CEO Steve Jobs announced the vendor would report non-GAAP earnings and urged analysts to look at those figures instead.
Over that quarter, the iPhone business had grown to about $4.6 billion, or 39 percent of Apple's total business. Non-GAAP adjusted sales, which allotted each sale the moment it was rung up instead of spreading it out over the length of the iPhone user's contract, were 48 percent higher than reported revenue, Jobs said.
He told analysts that Apple's adjusted income was 115 percent higher when non-GAAP figures were considered.
Some analysts, like Barclays Capital's Ben Reitzes and Broadpoint Am Tech's Marshal, have already begun focusing on the non-GAAP numbers.
Rolling Along
Based on its earnings in 2008, Apple jumped from slot 109 in the Fortune 500 rankings in 2008 to No. 71 for this year. This is the highest it has been since 1994, when it ranked Number 67.
The Fortune 500 2009 report also listed Apple as eighth in the 20 most profitable technology companies.
In addition, a rumor that the next model of the iPhone will have voice control features and high-definition video is making the rounds. These are in addition to other features -- like a better camera and an FM radio transmitter -- that have already been reported. Apple is widely expected to unveil a new iPhone model in June.
Finally, the U.S. military has reportedly become a fan of the iPod touch, issuing it to ground troops in Iraq. They use it for everything from translation to making sense of data from satellites, drones and ground sensors.
"At the end of the day, Apple remains one of the few companies that's doing well in a very tough environment," Marshal said.
