The Single Greatest Challenge Apple Investors Face With Earnings on Tuesday

In just a matter of days, Apple (NASDAQ: AAPL  ) will report fiscal second-quarter earnings for the March quarter. Last time around, things didn't go so well. This time around, the Mac maker will face one challenge that's nearly insurmountable: guidance for the June quarter.

A new guidance method
This release will be unique on a number of levels when it comes to Apple's guidance. This will be the first earnings report since the company changed its guidance methodology. Investors are literally embarking into uncharted territory. As a reminder, here's how CFO Peter Oppenheimer vaguely described the seemingly subtle change:

In the past we provided a single-point estimate of guidance that was conservative, that we had reasonable confidence in achieving. This quarter and going forward we're going to provide a range of guidance that we believe that we're likely to report within. No guarantee, as forecasting is difficult, but we believe that we will report within that range.

It's a semantic debate, but analysts broadly considered Oppenheimer's comments to mean that Apple would be more forthcoming with its outlook and that the days of lowball forecasts are gone. However, their guess is as good as any linguist's, since Apple has naturally kept mum since January. Here's the official guidance Apple provided a quarter ago.

Metric

Guidance

Revenue	$41 billion to $43 billion
Gross margin	37.5% to 38.5%
Operating expenses	$3.8 billion to $3.9 billion
Other income and expense	$350 million
Tax rate	26%

Source: Apple.

Apple also no longer provides explicit earnings per share guidance, but my calculations put it in the ballpark of $9.18 per share. Even if the results come in line with Apple's outlook, EPS will fluctuate depending on how many shares Apple may have repurchased in the quarter. This factor could potentially be accretive to earnings if shares outstanding decline as they did last quarter, even as the stated goal of Apple's repurchase program is primarily to offset dilution from equity compensation.

Guidance for the June quarter is going to be extremely difficult to read. Numerous key rivals, particularly Samsung, are launching high-end flagships during the quarter at a time when Apple is expected to announce iPhone models as early as June -- which will lead to consumer purchasing delays.

What's even more frustrating for investors is that it almost doesn't matter what Apple reports for the March quarter when trying to understand its June outlook. Regardless of whether Apple posts a blowout, misses, or hits it midpoint on the dot, we're still only talking about a single data point under the new guidance methodology. In any context, a single data point is not statistically significant enough to draw meaningful conclusions. A blowout or miss could still be a fluke either way.

Besides, how many times have you heard of companies posting strong results, only to be overshadowed by soft outlook? June guidance will be the greatest challenge for investors to interpret, even if Apple knocks it out of the park.

Even with the ominous June guide on the horizon, there is a debate raging as to whether Apple remains a buy. The Motley Fool's senior technology analyst and managing bureau chief, Eric Bleeker, is prepared to fill you in on both reasons to buy and reasons to sell Apple and what opportunities are left for the company (and your portfolio) going forward. To get instant access to his latest thinking on Apple, simply click here now.