Apple (AAPL) Earnings: What to Expect and Should You Invest?

Analysts on Wall Street anticipate that Apple (AAPL) will report an increase in earnings year-over-year by the time it releases its financial results for the quarter ending September 2024. This expected outlook is crucial as it helps investors understand how Apple might perform financially, but the real question is how the actual results will measure up against these predictions.

Apple is scheduled to announce its earnings on October 31, 2024. If the numbers reported by the company exceed expectations, this could lead to a rise in its stock price. Conversely, if the company’s results fall short, the stock may decline.

The direction of Apple’s stock price movement following the earnings report will largely depend on management's commentary regarding current business conditions during the earnings call. Therefore, evaluating the likelihood of a positive surprise in earnings per share (EPS) is essential.

Zacks Consensus Estimate

For the upcoming earnings report, analysts are predicting that Apple will generate a quarterly EPS of $1.54, reflecting a growth of 5.5% compared to the same quarter last year. Expected revenues are projected to be $94.43 billion, also representing a 5.5% increase year-over-year.

Estimate Revisions Trend

It’s important to note that the EPS consensus estimate has been adjusted 0.9% lower over the last month. This adjustment indicates that analysts have altered their expectations regarding the company's performance.

Keep in mind that the overall change in estimates may not necessarily reflect the same trend across all analysts covering the stock.

Earnings Whisper

Changes in earnings estimates before an earnings announcement can provide insights into the company’s operational situation. This analysis is part of a unique prediction model known as the Zacks Earnings ESP (Expected Surprise Prediction).

The Zacks Earnings ESP compares the Most Accurate Estimate (the most current estimate) against the Zacks Consensus Estimate for the quarter. Analysts who adjust their estimates closer to the announcement date have the latest information, which may offer a more accurate prediction.

A positive or negative Earnings ESP reading can suggest how the actual earnings might differ from the consensus. However, the model is more effective when a positive Earnings ESP is combined with a favorable Zacks Rank (1 for Strong Buy, 2 for Buy, or 3 for Hold). Research shows that this combination is likely to result in a positive surprise nearly 70% of the time.

It's essential to understand that a negative Earnings ESP doesn’t automatically mean a company will miss earnings expectations. Historically, predicting an earnings beat for stocks with negative Earnings ESP readings has proven challenging.

Examine Apple’s Current Numbers

For this upcoming quarter, Apple has a Most Accurate Estimate that falls below the Zacks Consensus Estimate, signaling a generally bearish outlook among analysts regarding the company's earnings potential. This has resulted in an Earnings ESP of -17.71%.

At the same time, Apple holds a Zacks Rank of #3, which complicates the prediction that it may beat earnings expectations.

Consider Past Performance

When forecasting future earnings, analysts often look at how the company has performed compared to prior estimates. For instance, last quarter, analysts expected Apple to report earnings of $1.34 per share, but the actual earnings came in at $1.40, yielding a surprise of about 4.48%. Over the last four quarters, Apple successfully surpassed consensus EPS estimates every time.

Conclusion

Whether Apple will beat projections or miss them is not the only factor that influences stock price movements. Some stocks may decline in value even after posting better-than-expected earnings due to other disappointing results. Conversely, unexpected positive developments can boost a stock's price even after a miss.

Nevertheless, targeting stocks presumed to beat earnings expectations can improve investment success chances. Therefore, it's prudent to review a company's Earnings ESP and Zacks Rank ahead of its earnings report. Utilize available tools to discover the most promising stocks to consider for buying or selling prior to their announcements.

Apple does not currently present a strong case as an earnings-beat candidate. However, it’s vital for investors to assess additional factors when deciding whether to invest in this stock as the earnings release approaches.

Stay informed about upcoming earnings reports by checking an earnings calendar.

Apple, Earnings, Investing