Apple (AAPL) Earnings on Deck; Blow-Out Expected But FX Could Crimp Margin Expansion

All eyes are on Apple (NASDAQ: AAPL) into the company's all-important December quarter (Q1) earnings after the close of trading tonight.

Analysts on average are looking for the iPhone maker to report EPS of $2.60 on revenues of $67.69 billion, representing year-over-year growth of 25.6% and 17.5%, respectively. Unit numbers will also be important - most notably iPhone units with the Street consensus of about 66 million units.

By all accounts analysts are looking for a blow-out quarter from Apple. Not only are iPhone sales robust in the U.S. and Asia but a better mix of higher-margin iPhone 6 Plus and higher memory phones will certainly drive the top and bottom-line.

On average, over the past four quarters, Apple has beaten its EPS consensus by +7.5%, according to data at EPS Insider. That would suggest EPS of around $2.80. Meanwhile the stock has seen an average 1-week move over the past four quarters of +3.2% following earnings. Last quarter the stock was +2.7% in the day immediately following earnings and was +5.4% for the week following earnings.

In addition to earnings, guidance from Apple will also be crucial. In a note on the stock yesterday, Piper Jaffray analyst Gene Munster said Apple's guidance could imply about 5% revenue upside to Street estimates, which could keep the stock going post earnings.

One potential headwind this quarter is FX, given the strong U.S. dollar. In a note to clients earlier in the week, BMO Capital analyst Keith Bachman warned that gross margin expansion will be limited by FX. "Net, we believe Apple could report December quarter gross margins of around 39.0%", Bachman said. "However, in the absence of FX, we think gross margins would be approximately 40%. Hence, we believe FX will be a gross margin headwind in the December and subsequent quarters. We are not changing our estimates."

Apple normally reports results at 4:30PM ET.

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