Seeking Alpha
, Estimize (259 clicks)
Hedge fund trader, long/short equity
Profile| Send Message|
( followers)

Apple Inc. (NASDAQ:AAPL) is set to report FQ2 2014 earnings after the market closes on Wednesday, April 23rd. Apple, the creator of the iPhone, iPad, and iPod, is one of the most beloved and profitable consumer electronics companies on the planet. Apple did not release any new products this quarter, but they did begin distributing the iPhone in China back in January. Because Apple is between product cycles analysts expect earnings to be relatively flat and will be looking for information about the new product categories that CEO Tim Cook has promised are on the way later this year. It is widely rumored that Apple may launch an iWatch wearable device this year, which may be integrated with biometric technologies to securely identify and track the health of the wearer. Other whispers have Apple pinned to launch a 6th iteration of the iPhone this fall, which may feature a larger screen.

This quarter Wall Street is expecting Apple's earnings to come in 4c above last year's FQ2 EPS and is looking for revenue to remain flat in the absence of any new product launches. Here's what investors expect from Apple Wednesday.

The information below is derived from data submitted to the Estimize.com platform by a set of Buy Side and Independent analyst contributors.

(click to enlarge)

The current Wall Street consensus expectation is for Apple to report $10.22 EPS and $43.620B revenue, while the current Estimize.com consensus from 133 Buy Side and Independent contributing analysts is $10.48 EPS and $44.411B in revenue. This quarter the buy-side as represented by the Estimize.com community is expecting Apple to beat the Wall Street consensus on both EPS and revenue by a small but significant margin.

Over the previous 6 quarters, the consensus from Estimize.com has been more accurate than Wall Street in forecasting Apple's EPS and revenue 3 times each. By tapping into a wider range of contributors including hedge-fund analysts, asset managers, independent research shops, students, and non-professional investors Estimize has created a data set that is more accurate than Wall Street up to 69.5% of the time, but more importantly, it does a better job of representing the market's actual expectations. It has been confirmed by Deutsche Bank Quant. Research and an independent academic study from Rice University that stock prices tend to react with a more strongly associated degree to the expectation benchmark from Estimize than from the Wall Street consensus.

The magnitude of the difference between the Wall Street and Estimize consensus numbers often identifies opportunities to take advantage of expectations that may not have been priced into the market. In this case, we are seeing an average differential between the two groups' expectations.

(click to enlarge)

The distribution of estimates published by analysts on the Estimize.com platform range from $9.00 to $12.00 EPS and from $39.936B to $49.910B in revenues. This quarter we're seeing a moderate distribution of EPS estimates and a wide distribution of revenue estimates.

The size of the distribution of estimates relative to previous quarters often signals whether or not the market is confident that it has priced in the expected earnings already. A wider distribution of estimates signaling less agreement in the market, which could mean greater volatility post earnings.

(click to enlarge)

Over the past 4 months, the Wall Street EPS forecast dropped from $10.99 to $10.22, while the Estimize consensus fell from a high of $10.99 to $10.48. Meanwhile, the Wall Street revenue consensus sank from $45.991B to $43.620B while the Estimize consensus gradually declined from $45.652B to $44.411B. Timeliness is correlated with accuracy and approaching the end of the quarter, we saw expectations begin to converge between Wall Street and the Estimize community.

(click to enlarge)

The analyst with the highest estimate confidence rating this quarter is deagol, who projects $10.60 EPS and $44.053B in revenue. deagol is ranked 236th overall among over 4,150 contributing analysts. Apple is the only stock that deagol covers on the Estimize.com platform and he has been more accurate than Wall Street in forecasting Apple's EPS and revenue 50% and 64% of the time respectively over 14 quarters. Estimate confidence ratings are calculated through algorithms developed by deep quantitative research, which looks at correlations between analyst track records and tendencies as they relate to future accuracy. In this case, deagol is expecting Apple to beat the EPS consensus from both Estimize and Wall Street but report between the two groups' expectations on revenue.

This quarter Apple did not release any new products, but they did launch the iPhone in China and there is good reason to believe that 1 or more new products are on the way later this year. On Wednesday, contributing analysts on the Estimize.com platform are expecting Apple to report a modest gain of 39c per share in EPS and a 1.9% gain in year over year revenue while Wall Street expects earnings to remain flat.

Source: Here's What To Expect From Apple On Wednesday