Apple And Intel Demonstrate How Analyst Expectations Impact Share Performance More Than Results

Includes: AAPL, INTC
by: John W. McAuley

It’s amazing that analyst expectations for a stock can have a greater influence than actual earnings performance.

On Tuesday October 18, both Apple (NASDAQ:AAPL) and Intel (NASDAQ:INTC) released their September Quarter Earnings results. The reaction of the market the next day, October 19, was remarkable given the facts. As I write this on Wednesday October 19 ,Apple closed the trading day down 5.6% and Intel closed up +3.5% for a 9.1% difference in investor reaction to the earning results of these two stocks. The startling difference was not because of the actual earnings results. It was because the “analyst expectations” promoted by the media for each stock was so different.

See the Full AAPL Earnings Call Transcript

In the case of Apple, the company had projected September Quarter earnings of $5.50 per share when it released its June Quarter financial results in July. Despite this company projection, analyst projections continued to rise over the July-Sept period. By Oct 18, analyst average projections had risen to $7.38 per share for the quarter. This high estimate was also the fault of Apple, which has tended to sandbag estimates every quarter.

Let’s compare the actual results of the September Quarters for 2011 versus 2010 for the two companies:


Sept Quarter 2011

Sept Quarter 2010

% Change


$28.27 Billion

$20.34 Billion


Net Income

$6.6 Billion

$4.3 Billion


EPS (Basic)




EPS TTM (Basic)




Number of Shares (Millions)




Click to enlarge

Over the year, Apple’s revenue grew 39%. EPS grew 51% and TTM earnings increased 83%. Apple closed the next day down 5.6% at $398 per share for a Price/Earnings ratio of 14.4.

Average analyst projections for Apple’s EPS was $7.38 for the quarter. The actual EPS was $7.13 so that Apple’s financial results came in 3% below average analyst expectations but 30% above Apple’s original guidance for the quarter.


Sept Quarter 2011

Sept Quarter 2010

% Change


$14.29 Billion

$11.10 Billion


Net Income

$3.47 Billion

$2.96 Billion


EPS (Basic)




EPS TTM (Basic)




Number of Shares (Millions)




Click to enlarge

Over the year, Intel's revenue grew 29%. EPS grew 26 % and TTM earnings increased 20%. Intel closed the next day up 3.5 % at $24.4 per share for a Price/Earnings ratio of 10.1.

See the Full INTC Earnings Call Transcript

Average analyst projections for Intel’s EPS was $.65 for the quarter versus $.67 actual such that Intel came in 3% above average analyst expectations. Intel had provided guidance of about $14 billion in sales for the quarter so its actual results were in line with its guidance. As you can also see from this table, Intel’s earnings per share grew more than profitability and beat analyst expectations because of the intelligent use of cash by Intel to buy back shares.

Both Intel and Apple are great technology companies and I own each personally. I feel both companies performed very well for the quarter and both will appreciate in value over time. Nevertheless, Apple's actual earnings growth performance was more than 2 times better than Intel.

Immediate market reaction was not driven by results, but rather by media driven headlines that Apple had “missed analyst targets” for the stock. Actually, there were 44 analyst targets whose EPS estimates ranged from $6.10 to $8.19. The average of the total 44 EPS estimates just happened to be $7.38. Even Apple's EPS guidance of about 30% increase in earnings for next quarter (Dec 2011) ($9.30/share) failed to impact Wednesday's sharp stock decline.

Disclosure: I am long INTC, AAPL.