Handicapping Apple’s quarterly earnings and revenue: Q2 2013

“In January, when Apple (AAPL) reported its earnings for the December quarter — its first fiscal quarter of 2013 — the company made explicit a change most investors seem to have missed,” Philip Elmer-DeWitt reports for Fortune.

“For years Apple had been low-balling Wall Street, offering revenue and earnings forecasts every three months so ‘conservative’ they became a running joke,” P.E.D. reports. “Then, last March, something changed… In January, CFO Peter Oppenheimer addressed the issue, albeit somewhat inscrutably: ‘In recent years,” he told analysts, “our guidance reflected a conservative estimate of results every quarter that we had reasonable confidence in achieving. Going forward we plan to provide a range of guidance that reflects our belief of what we’re likely to achieve. Well we cannot forecast with complete accuracy we believe we’re likely to report within the range of guidance we provide. Therefore for the March quarter we’re providing revenue guidance of between $41 billion and $43 billion compared to $39.2 billion in the year ago quarter.'”

P.E.D. reports, “The difference between ‘belief’ and ‘reasonable confidence’ is a subtle one, but the analysts who follow the company seem to have got the message. The forecasts from the 61 analysts we polled — 38 professionals and 23 amateurs — are as tightly packed as we’ve ever seen them.”

Full article, with the full list of individual analyst’s revenue and earnings numbers, here.


    1. ALL publicly traded firms “lie” about their earnings expectations. The point of the “lie” is to under promise and over deliver.

      The key is that the “lie” follow a predictable formula that can be decoded by the WS. Prior to April 2012 that “code” was well known among WS analysts. Yes, Apple management allowed for a large margin of error, but those charged with interpreting management’s guidance were well aware of that.
      The guidance provided during the April 2012 conference call changed to a formula more commonly used by the rest of corporate America (not as conservative).
      WS did not pick up on that change until Apple management slapped them in the face with it during the January conference call (9 months and 3 earnings reports later).

      WS consensus for the upcoming earnings report reflect Apple’s revised guidance formula, and can be seen in the tight grouping of over 60 analysts estimates for the March quarter.

      This is a very good change from past guidance practices (under Steve Jobs).

    2. Apple is not sandbagging its estimates anymore according to Apple. Analysts, professional and amateur, try to come up with their estimate of Apple’s earnings for the last quarter. It should be an easier job now than in the past when Apple always gave extra low guidance. Thus the reason for the tight grouping of analysts estimates. It’s the same for almost all companies at earnings time. Analysts try to figure out how well a company has done in the previous quarter. Some companies give more information about their sales, revenue, margins etc. compared to others who do not reveal as much during the actual quarter. So some companies are easy to estimate and some are not. Apple is very tightlipped so analysts have a more difficult time estimating at earnings time. Analysts have been lowering their estimates lately for Apple due to the reports that sales/revenue has slowed for Apple’s products. In the end they are merely estimates. What really counts is what is actually reported on the earnings call. People get too excited one way or the other about estimates. Listen to the earnings call. Pay attention to guidance for the next quarter. And quarters past that. Those are facts or at least what the company believes to be factual information about the future of the company. That along with the data from the quarter just reported amount to the status of the company. That’s all that matters. Estimates are just fodder for discussion. A waste of time. I hope Apple does well Tuesday but I wouldn’t bet either way. And I have in the past taken a very big chance at some earnings calls. Which is always risky. But not this time. Hope for the best prepare for the worst.

    1. What you’re saying sounds good to me, but then the analysts are just going to set up their own high guidance and Apple shareholders will still get screwed. Apple’s expectations are always set higher than most companies’ expectations. Everything about Apple’s earnings is set up as a guessing game with Apple being rigged to miss in some way or another.

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