Deciphering Apple & Microsoft Earnings Expectations (AAPL, MSFT)

Apple Inc. (NASDAQ: AAPL) is set to report earnings after the close of trading today, and Microsoft Corporation (NASDAQ: MSFT) is set to report earnings after the market close tomorrow.  What we are looking for is a relative performance and key metrics to determine which has more room to run and which may have more defined ranges.

Apple’s recent low close was $83.11 on March 9, so shares have rallied just under 50%since then.  Microsoft’s recent low close was $15.15 on March 9, so shares have rallied more than 25% from the lows of six weeks ago.  This is actually just the start of it.

The options front shows that analysts are looking for, or are at least braced for, a little larger move in Apple based upon earnings.  The May options expirations for Apple show that traders appear to be braced for a move of up to about 5% to 6% in either direction.  The May options expirations for Microsoft show that traders appear to be braced for a move of up to about 4.5% to 5% in either direction.

The technicals here are also very different.  Apple is now well above the 200-day moving average of $115.60, and the 50-day moving average is $102.62.  That same 200-day moving average is still more than 10% above today’s prices and is listed as $21.45, while the 50-day moving average is $17.82.  This indicates that Microsoft probably has more defined trading bands in place for longer-term investors, while Apple has more room to run up and down.

Apple Estimates (Thomson Reuters):
Q2-09    Q3-09      FY09      FY10
EPS  $1.09    1.12         5.21          5.95
REV$7.96B    8.28B    35.30B    40.38B

Microsoft Estimates (Thomson Reuters):
Q3-09        Q4-09        FY09        FY10
EPS $0.39        0.40          1.74          1.91
REV$14.10B    15.04B    60.78B    61.73B

Apple’s market cap is now $111 billion, while Microsoft’s market cap is $167 billion.  Both are expected to be conservative in guidance.

JON C. OGG