Apple 2.0

Covering the business that Steve Jobs built

Handicapping Apple's quarterly earnings and revenue: Q2 2013

April 21, 2013: 7:36 AM ET

The first test of Apple's new guidance philosophy: Belief vs. reasonable confidence.

Click to enlarge.

Click to enlarge.

FORTUNE -- In January, when Apple (AAPL) reported its earnings for the December quarter -- its first fiscal quarter of 2013 -- the company made explicit a change most investors seem to have missed.

For years Apple had been low-balling Wall Street, offering revenue and earnings forecasts every three months so "conservative" they became a running joke. Every quarter, everybody knew that unless something had gone terribly wrong the company was going to clobber its guidance numbers. Between Q4 2010 and Q2 2012, for example, Apple exceeded its revenue forecasts by anywhere from 12% to 29%.

Then, last March, something changed.

The revenue number Apple issued for the June quarter turned to be only 3% lower than its actual results -- a surprise that was interpreted by the market as a huge miss. Apple's share price fell $30 overnight.

chart_ws_stock_appleinc_20134216382_240xaThe same thing happened the next two quarters. Apple out-performed its September and December revenue guidance numbers by 5.8% and 4.8%, respectively. But the Street was still looking for 20% beats. Apple's share price went into a downward spiral from which it has yet to recover.

In January, CFO Peter Oppenheimer addressed the issue, albeit somewhat inscrutably:

"In recent years," he told analysts, "our guidance reflected a conservative estimate of results every quarter that we had reasonable confidence in achieving. Going forward we plan to provide a range of guidance that reflects our belief of what we're likely to achieve.

"Well we cannot forecast with complete accuracy we believe we're likely to report within the range of guidance we provide. Therefore for the March quarter we're providing revenue guidance of between $41 billion and $43 billion compared to $39.2 billion in the year ago quarter."

The difference between "belief" and "reasonable confidence" is a subtle one, but the analysts who follow the company seem to have got the message.

The forecasts from the 61 analysts we polled -- 38 professionals and 23 amateurs -- are as tightly packed as we've ever seen them. The consensus among the pros is that Apple will report sales of $42.41 billion; the indies are at $42.9 billion. The median estimate is $42.7 billion, up 9% from last year's $39.2 billion.

All those averages and medians -- as well as the revenue estimates of 70% of the analysts we've heard from so far -- are within Oppenheimer's $41-43 billion range.

When it comes to earnings, Oppenheimer was no help. For the first time since he became Apple's chief financial officer, he didn't offer an EPS forecast -- perhaps because he knew earnings were going be lower than the blow-out $12.30 per share Apple reported in the same quarter last year.

But that didn't stop our analysts making their quarterly guesses. The average earnings estimate among the pros this quarter is $10.01 per share, 19% below last year's $12.30. The indies are looking for $10.55 (down 14% year over year).  The median EPS: $10.10 (down 18%).

Below: The individual analyst's revenue and earnings numbers, with the pros in blue and the amateurs in green. We'll find out who was closest  to the mark when Apple reports its Q2 2013 earnings after the markets close next Tuesday.

Rev and est Q2 sheet

Thanks once again to Posts at Eventide's Robert Paul Leitao for pulling together the Braeburn Group numbers.

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About This Author
Philip Elmer-Dewitt
Philip Elmer-DeWitt
Editor, Apple 2.0, Fortune

Philip Elmer-DeWitt has been following Apple since 1982, first for Time Magazine, and now on the Web for Fortune.com.

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