Cracking the Oppenheimer Code, Part 1 of 5: Just the Facts (Mostly)

Here’s Apple’s official guidance for the soon-to-conclude fiscal quarter.

Apple is providing the following guidance for its fiscal 2013 third quarter:

  • revenue between $33.5 billion and $35.5 billion
  • gross margin between 36 percent and 37 percent
  • operating expenses between $3.85 billion and $3.95 billion
  • other income/(expense) of $300 million
  • tax rate of 26%

Two quick observations…apologies if they’re obvious to most everyone here, but for this first run, I’ll just put ’em out there.

  1. There’s a bunch of threes in that guidance.
  2. As it did in January, Apple provided all of the numbers home gamers and pros need to calculate net income range (gross margin being readily converted into cost of goods sold (COGS)).

Earnings per share…well that depends on share count, doesn’t it. But that math isn’t excessively troublesome given the extent and timeframe of Apple’s buyback program – $50 billion as part of the $100B in total capital return by the end of 2015. Divide $50B by the number of fiscal quarters from the time of the expanded buyback announcement til calendar-end 2015 (11), and presto, reasonably educated guess until Apple provides some actual “share buyback data”.

Anyway, net income first. Take the most pessimistic and optimistic projections within the ranges, apply the formula (Revs – COGS – OpEx + OI&E – (pretax income * tax rate)),

and you get a range of about $6.223 – $7.093B in net income.

Let’s assume a share buyback (as in net diluted share reduction) of about 10M shares. That won’t make much of a difference in EPS projections, since that’s only a bit more than 1% of Apple’s total number of diluted shares (about 946 million as of fiscal Q2 2013).

Assume 936 million diluted shares and the resulting EPS range is about $6.58-$7.58.

The year-ago compare was $8.8B in net income and $9.32 diluted EPS.

So…yeah. But as I said, just the facts (mostly) for now. There’s still plenty of time for a deeper dive into more pinpoint estimates and why Apple’s growth trajectory looks the way it does. Now that the foundation’s set, let’s see where we go from here.

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