The Oppenheimer Code, Fiscal Q4 2013, Part 1 – Guesstimate for X

For those of you who are new to the AAPL Tree or the home game estimation process – here’s a “blueprint” for getting net income range and a semi-educated guess for EPS range out of Oppenheimer’s still-fairly-new-methodology guidance.  Just go with the numbers Oppenheimer provided for this fiscal quarter.

For everyone else (all three of you), off to a running start as promised.

Starting from from guided revenue range of $34B-$37B, net income range is about $6.28B – $7.34B, more or less.

That compares to actual revs of about $36B and net income of $8.22B ($8.67 EPS) in fiscal Q4 2012.  So…yep, sure would be nice for GM to achieve longer-term stability, that is if that happens to align with Apple’s future plans.  And it “would’ve been nice” if OpEx wasn’t projected to go up at least $400M or so YOY.  Then there’s the tax rate projected to go up 2% YOY.  Yet another tough compare, even with the potential for slightly higher revenues.

But there’s a small twist – the buyback factor.  Apple has 948M diluted shares outstanding as of the end of fiscal Q4 2012.  That’s down to about 924M now.  No, it won’t make a _tremendous_ difference, but it’s still noteworthy.

Take your best guess at the number of diluted shares that Apple’s looking to purchase/net decrease this quarter (note that Apple appears to have already committed to buying back at least 11M more shares), and that’s your implied EPS range.

As for my rusty 2 cents?  In my humble opinion, it’s starting to look like Apple’s front-loading the buyback program (remember, it allocated $50B to that cause, which is more than 10% of the company’s diluted shares at current prices), and seriously buying what it perceives to be “the dip”.  It doesn’t seem too unreasonable for Apple to reduce diluted share count to around 900M by the end of fiscal Q4 2013.  After a little quick division, that yields implied EPS guidance of around $6.98 – $8.16.***

Yep, $8.16 EPS isn’t $8.67, and it sure isn’t a higher number.  No matter how you slice it, Apple’s still very much in transition for now.  But I guess having a multiple that’s still under Wal-Mart, IBM, even Microsoft helps a bit.  Along with the dividend, the buyback program still in play, etc…

We’ll resume our look at the Oppenheimer Code much closer to Q4 earnings.

***Care to assume that the “advance order” of 11M shares to repurchase will be it for Apple this quarter?  No problem, and not that big a difference anyway.  That yields an implied EPS range of about $6.88 – $8.04, more or less.

2 thoughts on “The Oppenheimer Code, Fiscal Q4 2013, Part 1 – Guesstimate for X

  1. A beat on revs to $37.5B and margins to 37.5%, assuming 880M diluted shares and we get awful close to beating EPS of a year ago for the Sept. quarter.

    • There’s a few “ifs” involved, but it’s not Mission Impossible.

      It depends on the products Apple launches this quarter. We need a very big iPhone push, and if a new form factor, cheaper iPhone shares the stage, we don’t need it “getting in the way” of the flagship iPhone. As of today, I’m wait-and-see on substantial earnings surprise, at best.

      I suspect that if there is a 5S, Apple fully intends to let the newer-looking iPhone to cause as much havoc amongst the competition as it desires. iPod mini all over again, except a cheaper device rather than a smaller one (?). You know what? I’d be fine with that, never mind the “damage” to ASP and probable hit to iPhone blended GM. The long game, and all that.

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