Why Analyst Earnings Optimism For Apple Doesn't Carry Over To 2013

| About: Apple Inc. (AAPL)

Analyst consensus predicts Apple will earn 59% more money than it did last year. The forecast isn't a departure from stellar Apple's earnings history: EPS have a 5-year-average growth rate of 65%. Consistent and wonderful. That assessment isn't hyperbole: 65% is simply sensational.

Yet, so often Apple critics carp that kind of growth cannot last and point to the slower 14% growth expected in 2013. Indeed, according to the analysts, Apple earnings production is about to change.

While analysts expect EPS $9.80 this quarter, a 53% increase over a year ago, they are looking for $9.81 next quarter, only a 26% increase. That's earnings growth deceleration.

Consensus forecasts go downhill from there. Starting October 1, Apple is forecast to only grow its fiscal year profits 14% year over year.

Sometimes companies, like people, turn over a new leaf. Come October 1, analysts expect the Apple (AAPL) tree to turn over a shrunken leaf.

(click to enlarge)Click to enlarge(source: yahoo.com)

Can the calendar be so cruel? Rip September off the wall and Apple's once sensational earnings are slated to increase only minisculely better than the S&P 500's expected 13.70% yearly growth.

If I just returned from a 5-year-voyage to Mars, maybe I'd believe that. Analyst consensus has been slighting future Apple earnings for years: Outlying forecasts have averaged under 15% for 4 years running. The pattern has been consistent: As quarters approach, consensus heats up.

Why are estimates not keeping up for 2013?

Analysts are increasing earnings this year so quickly that next year estimates just can't keep up. In just the last 90 days, consensus for this year's earnings have climbed $9.28. The numbers for 2013 have run up $11.31 over the same 90 days. Normally, that would be a colossal boost for 2013 forecasts. Not for Apple. Every time analysts jump 2012 estimates, the base used to compare 2013 estimates gets larger. To keep up, analysts would need to raise 2013 by $14 for every 2012 $9 increases to get a 55% yearly growth.

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Unfortunately, analysts aren't going to change their approach to forecasting. 2013 estimates probably won't reflect the company's spurting growth until this September when Apple closes its remarkable year.

Bottom line:

When you see next year's growth rate pegged at a low 14%, you'll know the reason why. Apple's earnings aren't decelerating. Rather, the analysts haven't yet caught up.

Disclosure: I am long AAPL.

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