Apple will reportedly release its latest earnings report on Thursday, but the company’s performance this quarter is expected to be somewhat muted after they already told investors that its revenue fell 5 percent year-over-year last quarter due to declining sales of Mac and iPad products.
But Apple will still remind investors that the company has massive scale and market power, after the tech giant has used its fiscal second-quarter report to tell investors that the board has authorized it to spend on stock buybacks and dividends. It was another way to tell announce to the world how profitable its business is and how much cash the company is throwing away each quarter.
Wall Street analysts expect Apple’s current buyback and dividend to reach $90 billion, comparable to last year’s authorized figure. “We think Apple will stay at that level,” said Angelo Zino, an analyst with research firm CFRA, in an interview.
The iPhone smartphone maker has been the top repurchaser over the past decade, with data from FacetSet showing that Apple spent more than $572 billion on stock buybacks from 2012 through the end of 2022, the most of any company. Since 2013, Apple has announced its board authorization level in its second-quarter earnings report.
Behind Apple in terms of repurchase amounts is its rival Alphabet, which has bought back $178.5 billion of stock over a decade. Google’s parent company just said its board authorized $70 billion in buybacks this year.
Analysts at Bank of America Securities Corp. said in a note earlier this month that capital returns will be a “focus” of Apple’s earnings report on Thursday. They expect Apple to have a $90 billion mandate, and Barclays analysts expect the same figure.
But some have questioned how long Apple will be able to maintain that level. In its report, Barclays said, “We expect AAPL to continue to work toward net cash neutrality at some point in the future.”
Net cash neutrality (a phrase used by Apple treasurer Luca Maestri when asked about buybacks) refers to the point at which a company’s cash is roughly equal to its debt. In achieving this point, the board can decide to slow the pace of its capital returns.
Apple is currently dealing with cash that has ballooned to $269 billion, its high point in the last decade. The company says they now have $165 billion in cash and $111 billion in debt, for a net cash position of $54 billion, the lowest in years.
While investors have anticipated a decline in Apple’s earnings in the last quarter and investors are prepared for it, the company’s outlook for the next quarter is still is a source of uncertainty.
Apple has not given formal earnings guidance since the start of the 2020 pandemic, citing that the current market is fraught with too much uncertainty. But the company’s management has been providing investors with data points on individual product lines and overall company sales.
Some analysts expect Apple’s sales to post another annual decline in June.
Wamsi Mohan from Bank of America wrote in a note this week, “We expect third-quarter guidance to imply another year-over-year decline; however, we expect this to be lower than the second quarter.”
Analysts on average expect Apple’s third-quarter revenue to grow about 2 percent to $84.7 billion, according to Refinitiv.
JPMorgan analyst Samik Chatterjee said that even with the weak outlook, Apple could still benefit from a “flight to safety” positioning. In a report released this week, he wrote: “The final outcome may simply be driven by the third-quarter outlook, and investors may be looking for reassurance and limited downside despite the tough macro picture. If Apple’s outlook indicates a year-over-year decline of less than 5%, Apple could still score a fundamental win.”
After all, Apple’s products sell in huge volumes and at high margins, and even weak growth will hardly change that.
The consensus analysts expect Apple to report second-quarter earnings of $1.43 per share on sales of $92.97 billion. That sales figure would be down 4.4 percent from a year ago.
FactSet expects iPhone revenue to decline 3.8 percent year-over-year to $48.66 billion. The agency also expects each of Apple’s hardware lines to see sales declines.
