Earnings Previews: AAPL, IBM, TXN, MSFT, NZ

October 15, 2010, 08:22 am ET, BY Patrick- Contributor, Stock Traders Daily| Editor: Thomas H. Kee Jr. (Follow on LinkedIn)

As we are only about a week into the third quarter earnings season, there haven’t been too many market moving companies to report results yet. That all changes next week as the calendar is loaded with influential, widely held stocks. On Monday, October 18, there are several prominent names from the technology sector that will provide the market with its first real insight into the health of consumers’ and businesses’ appetite for IT products and services.  Below, we take a look at a few of the names that traders and investors will be closely monitoring.

Unstoppable Apple

Here is what Apple’s (Nasdaq: AAPL) year-over-year revenue growth looks like, going back to 1Q09: +6%, +9%, +12%, +25%, +32%, +49%, and +61%. Consistent, steady sales growth such as that is quite impressive, and is why AAPL is currently trading above $300 share, up roughly 45% year-to-date.  Relative to consensus estimates, traders and investors familiar with Apple’s earnings history know that the company has a history of blowing out the expectations. Case and point – AAPL hasn’t beaten its EPS estimate by less than $0.15 (4Q08) in the past eight quarters. In order to exceed the Street’s projections once again, it will need to report 4Q09 EPS greater than $4.05 and revenue of $18.83 billion. A merely inline quarter would equate to a staggering annual profit growth of 123%.

Unlike Microsoft (Nasdaq: MSFT) or IBM (NYSE: IBM), Apple is mostly a consumer driven company, and consumers obviously love Apple’s products. Several research firms believe that its iPhone4 shipments were very robust during the quarter, and could reach 12-15 million units. The iPad has also been a rousing success, and could come in above the 7 million unit mark. Further, while everybody is aware of these products’ popularity here in the U.S., the buzz surrounding iPhones and iPads in China has reportedly been stronger than prior launches.

After taking a breather over the summer, shares of AAPL are once again cruising higher heading into its report. In fact, the stock is trading near its all-time high. With that said, it will take another clean blow-out quarter to keep the stock moving higher – especially since its valuation is elevated with a P/E of 23x. Should AAPL disappoint, and not beat by a large enough margin, subscribers of Stock Traders Daily will want to access our AAPL trading report beforehand to discover what support levels reside below.

Can Big Blue, TXN Alleviate Demand Concerns?

There haven’t been many companies better than IBM (NYSE: IBM) in driving operation efficiency over the past couple of years. For instance, it has kept the bottom line growing for eight quarters in a row, despite the fact that its’ best sales growth was a paltry 5% in 3Q08, and revenue actually declined in four of those quarters. While the earnings performance speaks volumes about its cost control, investors have grown tired of the flat sales and questions concerning demand for its diverse product and service set. This issue was only heightened last quarter when it reported that signed service contracts decreased 12%. To its credit, IBM has taken a step to address its stagnant sales growth by visiting the M&A market with its September 20, $1.7 billion acquisition of Netezza (NYSE: NZ). NZ is a data warehousing company, and its addition to IBM should expand big blues’ business analytics business and hopefully inject some life into its top line growth rates. For this quarter, the Street is expecting IBM’s sales to grow a mere 2% to $24.11 and profits to increase 14.5% to EPS of $2.75.

Compared to IBM, Texas Instruments (NYSE: TXN) has looked like an emerging growth stock with its revenue jumping by 42% in 2Q10 and 54% in the quarter before. For this quarter, though, analysts are calling for sales growth to slow to about 28% to $3.69 billion. On the positive side, Intel’s (Nasdaq: INTC) solid quarterly report on October 11 provides an encouraging data point. More specifically, INTC’s upside revenue guidance – albeit modest – should alleviate some concerns about the overall health of the semiconductor group. Further, TXN expressed confidence when it announced a massive $7.5 billion share repurchase on September 16. Given that TXN issued guidance on September 9 during its mid-quarter update – EPS of $0.64-$0.74 and revenue of $3.55-$3.85 billion – there shouldn’t be too much mystery about where its quarter will come in. With that in mind, peoples’ attention will turn to its fourth quarter guidance. The Street’s current projections stand at $0.63 in EPS and $3.51 billion in revenue.

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