Will Apple (AAPL) Beat Earnings Estimates this Season?
We expect iPhone-maker Apple Inc. (AAPL) to beat expectations when it reports fourth quarter fiscal 2014 results on Oct 20. The company has posted an average positive earnings surprise of 6.51% over the past four quarters.
Why a Likely Positive Surprise?
Our proven model shows that Apple is likely to beat earnings because it has the right combination of two key ingredients.
Positive Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is at +4.62%. This is very meaningful and a leading indicator of a likely positive earnings surprise for shares.
Zacks Rank # 2 (Buy): Note that stocks with Zacks Rank #1, 2 and 3 have a significantly higher chance of beating earnings.
Conversely, Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.
The combination of Apple’s Zacks Rank #2 and 4.62% ESP makes us very confident in looking for a positive earnings beat on Oct 20.
What is Driving the Better-than-Expected Earnings?
We believe that the partnership with China Mobile will help Apple in the near term. Apple’s recently launched large screen iPhones have received good response worldwide as it registered 10 million sales in the first weekend of the release itself.
However, on account of certain regulatory issues, its release in China got delayed by a month. We believe that the prospects of the large screen iPhones are bright in China, which happens to be the world’s largest market for smartphones.
Moreover, the launch of the two new iPads will further help in reviving sales by bringing back lost enthusiasm among consumers regarding the product. The availability of Microsoft's (MSFT) Office and the partnership with International Business Machines will boost iPad adoption among enterprises over the long haul.
However, Apple continues to face significant competition from Asian handset makers such as Samsung, which will remain an overhang on the stock in the near term.
Other Stocks to Consider
Apple is not the only firm looking up this earnings season. We also see likely earnings beats coming from these industry peers:
InvenSense, Inc. (INVN) with an Earnings ESP of +10.00% and a Zacks Rank #2.
Facebook Inc. (FB) with an Earnings ESP of +6.25% and a Zacks Rank #2.
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Read the Full Research Report on FB
Read the Full Research Report on INVN
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