• Sun. Oct 25th, 2020

Dimancherouge

Technology

Countdown To Earnings Season Starts

Apple’s fiscal fourth quarter has come to an end. We are now about two weeks away from the start of the earnings season in the US, and about four weeks from Apple’s earnings day – see Apple Maven’s coverage of last season for a refresher.

Today, I kick off the countdown to earnings day with a look at what Wall Street analysts expect to see regarding headline financial results. These estimates are likely to change over the next few weeks, as new reports come out. It will be interesting to watch the evolution from here to there and see how much more bullish or bearish experts may become until earnings day.

Expectations are set low

First, let me remind the reader that Apple has not provided guidance for its fiscal fourth quarter, as it used to do before the COVID-19 crisis. As a result, revenue and EPS estimates now range much more widely than usual, as was also the case last quarter.

The table below summarizes current expectations. Notice that, on earnings per share, consensus average of $0.70 would represent a decline of about 8% compared to the same quarter last year. Not everyone agrees, however. The more optimistic analyst sees EPS growing 13% to $0.86, while the more pessimistic of them bets on earnings dropping nearly 30% to $0.54.

When it comes to revenues, the story is not too much different. On average, experts currently expect to see a small year-over-year decline of 0.3% in total sales, which would be a stark contrast with last quarter’s 11% top-line increase. But the range of estimate is also very wide: from +10% to -18%.

First impressions

At first glance, a couple of thoughts crossed my mind:

  • Estimates appear to be overly de-risked at this moment. Should consensus be right about Apple’s fiscal fourth quarter, the company’s financial performance would have been much worse than it was in the most recent period, when COVID-19 should have been more disruptive to business.
  • The sharper expected decline in EPS vs. the decline in revenues suggests that margins are forecasted to be much weaker this time compared to last year. Once again, this was not the case in the most recent quarter, when operating margin expanded by 50 basis points. I wonder what Wall Street thinks will be the main driver behind the forecasted margin drag.

Be on the lookout for more earnings preview articles and videos in the next four weeks by visiting thestreet.com/apple.

Explore more data and graphs

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(Disclaimers: the author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting The Apple Maven)

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