Apple Needs an Old-School Beat

Published on January 23, 2013
by John Paczkowski

Ol_Skool_appleThere are plenty of people who claim to know what kind of financials to expect from Apple when it reports earnings this afternoon, but the truth is, no one has any idea.

Analyst estimates for Apple’s fiscal first-quarter earnings run the gamut from a low of $11.53 a share to a high of $15.50 a share. Sure, consensus is $13.47 per share, but the variance between low and high estimates is vast. Depending on whom you ask, Apple is either going to blow the quarter out, or flat-out blow it. It might post a 12 percent year-over-year increase in earnings. Or it might post a 14 percent decline. Consensus calls for a 3 percent decline, but that’s just an average of what is obviously some pretty broadly distributed guesswork. Further complicating matters: In the year-ago quarter, there were 14 weeks; this time, there were 13.

So Apple’s earnings report today is likely its most pivotal in years. Certainly, it’s among the most highly anticipated.

If Apple does post a decline in profit, it will be the first such drop in a decade. And that could exacerbate fears that the pace of Apple’s growth is slowing, and that waning demand for the iPhone and iPad really is the reason the company has reportedly been curtailing purchases of some components. Apple’s shares have dropped almost 30 percent on such unease since hitting a closing high of $702.10 in September.

If Apple doesn’t post that expected decline in profit, those fears won’t simply evaporate. Concerns that the high-end smartphone market that the company has dominated is nearing maturation, and that new products like the iPad mini are eating into Apple’s historically high profit margins will persist. But the immediate concerns that have been weighing on its shares will likely ease a bit.

When it last reported earnings, Apple said that, for its first quarter, which ended in December, it expected to report $52 billion in revenue and earnings of $11.75 a share. It’s a safe bet that the company will beat its own guidance. But that’s not going to be enough for the Street. It never is. For Apple to restore investor confidence, at least in the near term, it has got to substantially beat Wall Street’s expectations. That means coming in well above the $13.45 per share consensus.

“Investors are worried about iPhone demand, iPad mix, Mac sales and most importantly margins,” BTIG analyst Walter Piecyk told AllThingsD. “What we need now is an old-school Apple beat on top line, and margins that will make people forget about the March quarter and the rest of 2013 — at least for a few days.”

Apple reports results this afternoon after market close.

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