$90 billion in redemptions expected

  • Apple uses its second-quarter earnings reports to tell investors how much money its board has authorized the company to spend on stock buybacks and dividends.
  • Analysts expect that figure to reach $90 billion.
  • From 2012 to the end of 2022, Apple has spent more than $572 billion on stock buybacks.

Apple CEO Tim Cook reacts as a man shows him Apple’s Macintosh outside the Apple Store at Jio World Drive mall in Mumbai, India, April 18, 2023.

Ashish Vaishnav | Sopa Pictures | Light flare | Getty Images

When Apple releases its quarterly results on Thursday, the results are expected to be somewhat mixed — the company has already guided investors to a 5% drop in revenue, largely due to falling Mac and iPad sales.

But Apple will always remind investors of its gigantic size and market power, as the company uses its fiscal second quarter report to tell investors how much the board has authorized it to spend on stock buybacks and dividends. . It’s another way to tell the world how profitable their business is and how much money they make each quarter.

Wall Street expects that figure to hit $90 billion, the equivalent of last year’s authorization figure, based on a compilation of analyst reports.

“We think they’re keeping that intact,” Angelo Zino, an analyst at research firm CFRA, said in an interview.

The iPhone maker has been the king of buyouts for the past decade. From 2012 through the end of 2022, Apple spent more than $572 billion on stock buybacks, the most of any company, according to FactSet data. Since 2013, Apple has announced board authorization levels in its second quarter earnings report.

Rival Alphabet is second only to Apple in buybacks, with $178.5 billion in share buybacks over the decade. Google’s parent company just said its board has authorized a $70 billion takeover for the year.

Bank of America Securities analysts said in a note earlier this month that capital returns were the focus of Thursday’s report. They expect $90 billion in authorization, and Barclays analysts predict the same figure.

But some wonder how long Apple can maintain this pace. Barclays said in its report that “we expect AAPL to continue to strive to be cash neutral going forward.”

Net cash neutrality — a phrase Apple CFO Luca Maestri uses when asked about buyouts — refers to a point at which a company’s cash is roughly equal to its debt. . At that point, the board could decide to slow down the pace of its return on capital.

Apple is currently working on a cash pile that has soared to $269 billion, its highest point in the past decade. The company says it now has $165 billion in cash and $111 billion in debt for $54 billion in net cash, its lowest position in years.

As investors brace for a bearish quarter, forecasts are a big question mark.

Apple hasn’t given formal guidance since the pandemic began in 2020, citing uncertainty. But management has consistently provided data points to investors on individual product lines and the company’s overall sales.

Some analysts expect a further annual decline in sales for the June quarter.

“We expect the F3Q guide to imply another decline (year-over-year), but expect it to be lower than the F2Q,” Bank of America’s Wamsi Mohan wrote in a statement. note this week.

Analysts on average expect Apple’s third-quarter revenue to grow about 2% to $84.7 billion, according to Refinitiv.

JPMorgan analyst Samik Chatterjee said that while the outlook is weak, Apple could benefit from a “flight to safety” positioning.

“The end result may simply be driven by the F3Q forecast, where investors may be looking for insurance and visibility on a limited downside despite a challenging macro,” Chatterjee wrote in a note this week. If its outlook suggests a year-over-year decline of less than 5%, Apple could still “triumph” over fundamentals, Chatterjee wrote.

Apple, after all, sells a lot of devices at high margins, even without growth.

For the second quarter, the company is expected to report earnings per share of $1.43 on revenue of $92.97 billion, according to consensus estimates from Refinitiv. This number of sales would be an annual decline of 4.4%.

iPhone revenue is expected to drop 3.8% year on year to $48.66 billion, according to an estimate from FactSet. Decreases are expected across all Apple hardware product lines.

– CNBC’s Gabriel Cortes and Michael Bloom contributed reporting for this story.

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