Will Apple (AAPL) Miss Earnings Estimates? - Analyst Blog

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Apple Inc. ( AAPL ) is set to report first quarter fiscal 2014 results on Jan 27. Last quarter it posted a 4.82% positive surprise. The company has posted an average positive earnings surprise of 2.23% over the past four quarters.  Let's see how things are shaping up for this announcement.

Growth Factors This Past Quarter

We believe that strong holiday season sales and the deal with China Mobile ( CHL ) will help Apple to post strong results in the quarter.  Apple reported strong revenue growth in China in the fourth quarter. The China mobile deal will solidify Apple's position to a greater extent in China and will enhance profitability going forward.

However, Apple's iOS continues to face significant competition from Google's Android operating system in most of the other markets. The significant decline in revenues in the U.S and Rest of Asia suggests market share loss to low cost smartphones and tablets produced by Samsung, HTC, LG, Huawei and Amazon ( AMZN ). This remains a major headwind going forward.

Earnings Whispers?

Our proven model does not conclusively show that Apple is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Negative Zacks ESP: The Expected Surprise Prediction is -0.43%. This is because the Most Accurate estimate stands at $13.98 while the Zacks Consensus Estimate is higher at $14.04.

Zacks Rank #2 (Buy): Apple's Zacks Rank #2 (Buy) when combined with a negative ESP makes surprise prediction difficult. We caution against stocks with Zacks #4 and #5 Ranks (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter: 

  • Melco Crown Entertainment Ltd ( MPEL ), Earnings ESP of +5.0% and a Zacks Rank #1 (Strong Buy)
  • Western Digital ( WDC ), Earnings ESP of +0.96% and a Zacks Rank #1 (Strong Buy)
  • Multimedia Games Holding Company, Inc. ( MGAM ), Earnings ESP of +10.35% and a Zacks Rank #2 (Buy)


APPLE INC (AAPL): Free Stock Analysis Report

AMAZON.COM INC (AMZN): Free Stock Analysis Report

CHINA MOBLE-ADR (CHL): Free Stock Analysis Report

MULTIMEDIA GAME (MGAM): Free Stock Analysis Report

MELCO CROWN ENT (MPEL): Free Stock Analysis Report

WESTERN DIGITAL (WDC): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: AAPL , AMZN , CHL , MGAM , MPEL

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