Underestimating Apple: Analyst Consensus Plays Catch-Up

Apr. 2.12 | About: Apple Inc. (AAPL)

Analysts have been on the low side when it comes to estimating Apple's (AAPL) earnings: The company has beaten consensus 24 out of the last 25 quarters.

What's not commonly realized is the extent of the misses.

For instance, Apple has surpassed estimates a total of $6.36 for the last four quarters:

Click to enlarge
(Courtesy of Yahoo.com.)

But what does that really mean? What's $6.36 anyway? In real money that equates to $5.9 billion of earnings surprises for Apple over the last four quarters.

That's $5.9 billion. Now, we're talking real money.

Over the last four quarters, analyst consensus has underestimated Apple's earnings by an average 21%.

Analysts have been far more accurate forecasting Apple's peers:


Over the last four quarters, consensus missed Google (GOOG) by $280 million, Intel (INTC) by $1 billion, Cisco (CSCO) by $800 million, HP (HPQ) by $250 million and IBM (IBM) by $370 million.

No wonder analysts have been raising their estimates for Apple so quickly. They've boosted this year's earnings forecast by more than $9 a share in 90 days. A whopping increase in yearly estimates of $8.7 billion.

To put that in perspective, over the last 90 days, analyst consensus for fiscal year 2012 is going up on average $100 million a day.

And this from guys who have underestimated quarterly earnings by an average 21%.

This isn't new. Analysts have been rapidly increasing their forecasts for years and still keep falling behind.

I don't blame the pros. It's tough to forecast Apple. The company's growth is moving almost too fast to count. Apple has surpassed analyst consensus 24 out of the last 25 quarters. At those odds, it's a good bet the company will do it again. Even at $618, Apple remains a good buy.

Disclosure: I am long AAPL.

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