AAPL Orchard Estimates (change from previous estimate in italics)

Revenue: $32.6 billion (up $600 million) (guidance: $25.0 billion/consensus: $29.0 billion)

GM: 40.5% (down 40 basis points) (guidance: 38.0%/consensus 39.6%).

EPS: $8.55 (up $0.10) (guidance: $5.50/consensus: $7.16).

Product Unit Sales Estimates

Macs: 4.8 million (up 100,000)

iPad: 11.8 million (up 700,000)

iPod: 7.2 million (unchanged)

iPhone: 23.3 million (unchanged)

I remain confident in my initial quarterly estimates, published July 26, making only modest tweaks to a few variables. I raised my iPad sales estimate 700,000 units to reflect a higher production yield. I am maintaining my iPhone sales estimate (which I initially thought was too high) as the iPhone 4S is pushed out to 1Q12 and iPhone 4 supply draw-down did not occur to any major extent in 4Q.

Things to look for:

iPad Sales. Apple may provide an iPad sales update at next week’s iPhone event. Apple was successful in increasing iPad production in 3Q11 and many will look for continued gains in 4Q11. While my estimate calls for 11.8 million iPads, Street consensus may actually be slightly higher. I think iPad sales greater than 10 million will be deemed okay by the Street, while more than 13 million iPads will be considered strong.

iPhone Sales. With the iPhone 4S launch pushed out to 1Q12, I don’t think we will see too much of a drop-off in iPhone 4 demand, especially considering iPhone 4 was recently brought to new carriers and countries. Apple may still get a pass if iPhone sales are on the weak side as analysts will simply blame iPhone 4S ramifications such as pent-up demand. iPhone sales greater than 20 million will be deemed good, while more than 25 million will be considered strong. iPhone 4S launch weekend sales figures may also be shared on the call (although it is just as possible that the iPhone launch will occur after October 18 or Apple will choose to not disclose initial sales).

Guidance. Similar to previous quarters, investors will look for Apple’s 1Q12 guidance for evidence of any economic impact or weaker iPad/iPhone production plans. Unfortunately, management’s conservative nature will make it very difficult to reach solid conclusions. My initial 1Q12 EPS estimate is $10.00 (Street consensus is $8.83) on $39.7 billion of revenue. I would consider EPS guidance around $7.00, with revenue in high $20s billion, as solid.

Two other scenarios may occur: 1) Apple may announce extra conservative EPS guidance due to economic concerns or 2) iPhone supply concerns related to the iPhone 4S launch. I think extra conservative EPS guidance would be something like $5.50, which compares to Apple’s reported $6.43 in 1Q11 (one could make the argument that Apple will put guidance at least above last year’s $6.43 EPS).

If Apple delivers a blow out 4Q11 quarter, chances are good Apple may run with extra conservative 1Q12 guidance as analysts won’t necessarily increase 1Q12 estimates, but would still maintain Apple target prices due to the 4Q11 beat. Accordingly, expectations wouldn’t be raised too high and Apple will be in a good position for another solid holiday quarter.