With merely hours left before today's earnings call, investors are anxiously waiting for the most important earnings report of the quarter: Apple's (AAPL). Prior to Apple's last earnings release, I calculated Apple's Q2 earnings, merely off by 2.15%. I'll be utilizing the same calculation metrics in projecting Apple's earnings today.
In analyzing Apple's earnings release today, I took a moving-weighted average approach to create a predicting value of future earnings based on the 12-month Q/Q increase in earnings. First, I did a quarter-to-quarter earnings appreciation comparison, tracking the percent increase in EPS over the past year by comparing quarterly earnings to those of its previous year. By doing this juxtaposition, I got the following values:
· Q2 2012/Q2 2011: 92.2% increase
· Q1 2012/Q1 2011: 116% increase
· Q3 2011/Q3 2010: 52% increase
· Q2 2011/Q2 2010: 36.5% increase
From this point, I assigned weights onto these values; placing the greatest weights on Q2 2012/Q2 2011 and Q3 2011/Q3 2010. My reasoning for this is that I believe a very strong indicator of future earnings comes from a two-fold approach: viewing the most recent earnings and also the previous Q/Q earnings of the same quarter. This allows us to put a stronger emphasis on earnings trends. I assigned a 40% weight to Q2 2012/Q2 2011, 20% weight to Q1/Q1, 30% weight to Q3/Q3, and 10% weight to Q2 2011/Q2 2010; in doing so, I calculated a weighted moving average of 79.33%. This should give us a general estimate to be used solely as a guideline for making a buy/sell decision now regarding today's earnings release. Applying the 79.33% weighted-moving average to our 2011 Q3 EPS of $7.79 will bring us to an EPS of $13.97.
There are some factors which will push down Apple's earnings this quarter, including decreased overall iPhone demand in anticipation of the iPhone 5. In my previous articles, I projected an October 17th release for the iPhone 5, however, other analysts project a December release which, in my opinion, is unlikely to happen. Although Apple's iPhone sales, which drive its profitability tremendously, will likely decline compared to last quarter, I anticipate that the immense demand from China and iPad sales will at least offset some of the decreased iPhone sales. My earnings projections are on the higher end of most estimates, but I do believe its representative of Apple's earnings track-record.