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My Thoughts on Apple’s Recent Earnings Report and Analyst Expectations

Just the other day Apple announced their earnings for the second calendar (third fiscal quarter) of 2012. Apple beat their own revenue guidance by $1 billion and saw overall growth of 23%. However, Wall Street analysts were expecting more from the company that has been experiencing stratospheric growth over the past few years.

Some exceptionally bullish analysts, such as Thembelani Kewtane, of The Braeburn Group, expected Apple to pull in as much as $46.42 billion in revenue. The range works in increments all the way down to an estimate of $35.08 billion predicted by Kathryn Huberty of Morgan Stanley. There was a very wide range of guesswork at play, and most analysts severely overshot. To be fair, and I know nothing about financial predictions, it would be easy to overshoot considering Apple's recent, successful, track record.

On the flip side of things, we all had to have seen this coming. As Apple moved upward, the law of large numbers had to get in the way. To continue the growth they were seeing, by percentage, the amount of money Apple would have to take in would increase exponentially. This simply cannot continue going forward. With that in mind, analysts are going to have to curb their estimates to compensate for the difference.

The fact is, Apple had a good quarter. They brought in $8.8 billion in profit. Apple did not report a loss, Wall Street just over-estimated what they thought the company would pull in. Apple did better than they even expected. Growth is there and everyone wins, including the shareholders.

So, the lesson here is one that I had learned awhile back- analysts are needed, and do good work, but take what they say with a healthy dose of skepticism. They have the same information that you and I have, yet they get paid for their estimations. It's educated guesswork and little more. Personally, I had no idea what Apple might have earned until they announced the figures. That's why I'm not paid for my financial insight. That said, I would pay more attention to a company's guidance (in this case, Apple) than I would an analysts predictions.

Expect more quarters like this going forward, where Apple earns the kind of money that most companies can only dream of bringing in, while Wall Street analysts scream that the company missed their mark. However, next time around you and I will know better.


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