NEW YORK (AP) -- Apple Inc. plans to report fiscal second-quarter results on Tuesday, after a bruising winter for the stock, which is back down to 2011 levels. Apple has yielded its position as the world's most valuable publicly traded company to Exxon Mobil Corp.
WHAT TO WATCH FOR: Apple is expected to post its first year-over-year earnings decline in 10 years, a big comedown for a company that has been on an incredible tear of innovation and money-making. Sales are still growing, but its margins are shrinking. That's both because of the company's stated strategy of producing the best devices it can, without cost-saving shortcuts, and because it's undercutting sales of its full-size iPad with the cheaper, lower-margin iPad Mini.
In the longer perspective, investors are starting to seize on the fact that the company hasn't launched a ground-breaking new product like the iPhone or iPad since 2010, the year before CEO Steve Jobs died. They've pulled out of the stock this winter, sending the shares down more than 40 percent to levels last seen in 2011.
Investors are starting to look at the company as if it will never again produce a ground-breaking new product like the iPhone and iPad. The stock has lost 44 percent of its value since peaking at $705.07 on Sept. 21, the day the iPhone 5 went on sale.
Analysts say Apple could turn around investor sentiment by handing over more of its cash to shareholders. It started paying a dividend last summer and is buying back a modest number of shares, but not enough to make a dent in its $137 billion cash pile, which keeps growing. In the quarter, the company engaged in a public debate with a hedge fund manager who wanted it to institute a new class of preferred shares, and said it keeps looking at ways to use its cash. Analysts are sure to press executives on the issue on the conference call after the earnings report.
Investors will also be looking closely at sales figures. Analysts expect Apple to report shipping about 35 million iPhones and 17 million to 18 million iPads. Together, those two product lines make up three-quarters of Apple's revenue.
WHY IT MATTERS: Even with the recent pull-back in the stock, Apple is the world's most valuable public company, with a market capitalization of about $575 billion. During the quarter, it beat Microsoft's old market capitalization record for a U.S. company of $623 billion, set in 1999. The iPhone, released in 2007, essentially created the mass smartphone market. The iPad, introduced in 2010, did the same for the tablet market.
WHAT'S EXPECTED: Analysts, on average, expect earnings of $10.03 per share on revenue of $42.45 billion, according to FactSet.
Apple has said it expects revenue of $41 billion to $43 billion. It had a long tradition of low-balling forecasts, but has signaled that its new forecasts are more realistic.
LAST YEAR'S QUARTER: In the same period a year ago, Apple earned $11.6 billion, or $12.30 per share, on $39.2 billion in revenue.