Apple earnings: It's all about the capital return program

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Apple earnings: What to watch

Now that the Apple Watch is finally here, investors can pay attention to what really matters: Apple's earnings. (Tweet This)

The Cupertino, California-based powerhouse is slated to report fiscal second-quarter results after the bell on Monday. The Street expects Apple to deliver earnings of $2.16 per share on revenue of $56.06 billion, according to analysts' estimates from Thomson Reuters. That's a 30 percent and 23 percent increase year over year, respectively.

And while Wall Street will be watching iPhone sales closely, investors will also be listening for an update to Apple's capital return program.

Capital return program

Since 2012, when the company launched the largest share repurchase program ever, Apple has returned a little more than $100 billion to shareholders in stock buybacks and dividends. It will return a total of $130 billion to shareholders by the end of 2015.

The company increased its dividend by 15 percent in 2013 and 8 percent last year, and said last April that it plans to continue to raise its dividend on an annual basis. So investors will be watching closely to see how much the needle moves this year.

"We believe the bogey for investors is a 15 percent increase to Apple's total reported capital return number (shares repurchase plus past dividends), which would imply a $150 billion headline number, up from $130 billion announced last year," said Gene Munster, an analyst at Piper Jaffray, in a recent note.

Apple still has loads of cash on hand, about $178 billion, according to the company's fiscal first-quarter earnings. But of that, about $157.8 billion is overseas where it is protected from U.S. taxes.

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Given CEO Tim Cook's recent statements about the company's cash pile, investors are hopeful that a bigger increase is on the way.

"My view is for cash that we don't need—with some level of buffer—we want to give back," Cook said at the Goldman Sachs Technology Conference in San Francisco in February. "It may come across that we are, but we are not hoarders."

The other big thing: iPhone sales

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As for iPhone sales, some analysts are predicting the company will soar past expectations thanks in large part to huge demand in China.

While the Street is estimating Apple sold about 55 million iPhones, Stifel Nicolaus increased its estimates earlier this week from 53.6 million to 59.6 million units.

Apple's deal with China Mobile and growing wireless infrastructure in China are the big factors positively impacting iPhone sales.

"We continue to view the ramp of 4G in China as a significant positive tail wind for Apple through 2015 as China Unicom and China Telecom were issued licenses to operate their 4G wireless networks in late February 2015," said Aaron Rakers, an analyst at Stifel Nicolaus, in a recent note.

Rakers has a $150 price target for the stock with a "buy" rating.

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Munster said that while he expects the company to sell around 57 million iPhones for the quarter, he also expects the company to issue guidance that is 1 percent higher for the June quarter, which would be driven by strengthened iPhone sales and an early take on Apple Watch sales.

Given that Apple Watch went on sale after the company's quarter ended, we won't get a glimpse into how many of the new devices it sold.