Apple: Testing Analyst EPS Estimates With Revenue Forecasts

  • Posted: 19 December 2010 03:52 PM

    In response to AFB member requests to plug analyst estimates into my eps outcome matrix, this morning I posted Apple: Testing Analyst EPS Estimates With Revenue Forecasts.

    While this method isn’t intended to be precise, it’s a method to gauge whether or not analyst eps estimates relative to revenue forecasts are “within the ball park” of recent quarterly results.

         
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    Posted: 19 December 2010 04:07 PM #1

    Good analysis as always.

    The “net profitability ratio” is a nice “reality check” for estimates.  Totally agreed, if we’re anywhere close to $26.5B revs, EPS is almost “guaranteed” to be over $6.00 EPS.

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  • Posted: 19 December 2010 04:40 PM #2

    Mav - 19 December 2010 08:07 PM

    Good analysis as always.

    The “net profitability ratio” is a nice “reality check” for estimates.  Totally agreed, if we’re anywhere close to $26.5B revs, EPS is almost “guaranteed” to be over $6.00 EPS.

    If EPS is under $6.00 and in the $5 range, would that be consider bad and cause AAPL share price to go down.

         
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    Posted: 19 December 2010 04:50 PM #3

    alice - 19 December 2010 08:40 PM
    Mav - 19 December 2010 08:07 PM

    Good analysis as always.

    The “net profitability ratio” is a nice “reality check” for estimates.  Totally agreed, if we’re anywhere close to $26.5B revs, EPS is almost “guaranteed” to be over $6.00 EPS.

    If EPS is under $6.00 and in the $5 range, would that be consider bad and cause AAPL share price to go down.


    Apple guided around 4.80 didn’t they? I would think Mars bumping into earth would be more probable than Apple reporting $5.00 eps. :bugeyed:

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  • Posted: 19 December 2010 04:56 PM #4

    alice - 19 December 2010 08:40 PM
    Mav - 19 December 2010 08:07 PM

    Good analysis as always.

    The “net profitability ratio” is a nice “reality check” for estimates.  Totally agreed, if we’re anywhere close to $26.5B revs, EPS is almost “guaranteed” to be over $6.00 EPS.

    If EPS is under $6.00 and in the $5 range, would that be consider bad and cause AAPL share price to go down.

    The 5 dollar range is a huge range for EPS

    Current average estimate per Yahoo Finance is 5.29 eps for the current quarter.  That would yield a trailing twelve month eps of 16.77.

    I am not particularly good at predicting what will happen to share price based on quarterly results. I know that I want an EPS of > 5.80.  A 6 something and I will do a little happy dance

         
  • Posted: 19 December 2010 05:13 PM #5

    roni - 19 December 2010 08:56 PM
    alice - 19 December 2010 08:40 PM
    Mav - 19 December 2010 08:07 PM

    Good analysis as always.

    The “net profitability ratio” is a nice “reality check” for estimates.  Totally agreed, if we’re anywhere close to $26.5B revs, EPS is almost “guaranteed” to be over $6.00 EPS.

    If EPS is under $6.00 and in the $5 range, would that be consider bad and cause AAPL share price to go down.

    The 5 dollar range is a huge range for EPS

    Current average estimate per Yahoo Finance is 5.29 eps for the current quarter.  That would yield a trailing twelve month eps of 16.77.

    I am not particularly good at predicting what will happen to share price based on quarterly results. I know that I want an EPS of > 5.80.  A 6 something and I will do a little happy dance

    Based on the numbers I’m seeing, you’ll be dancing all night. If the guy for Georgia does bring the tequila, few of us will remember the evening’s celebration.  LOL

    I posted the topic due to the disconnect between analyst revenue forecasts and resulting eps estimates. I’m frustrated by the numbers I’m seeing from the pros.

         
  • Posted: 19 December 2010 05:14 PM #6

    mbeauch - 19 December 2010 08:50 PM
    alice - 19 December 2010 08:40 PM
    Mav - 19 December 2010 08:07 PM

    Good analysis as always.

    The “net profitability ratio” is a nice “reality check” for estimates.  Totally agreed, if we’re anywhere close to $26.5B revs, EPS is almost “guaranteed” to be over $6.00 EPS.

    If EPS is under $6.00 and in the $5 range, would that be consider bad and cause AAPL share price to go down.


    Apple guided around 4.80 didn’t they? I would think Mars bumping into earth would be more probable than Apple reporting $5.00 eps. :bugeyed:

    No need to check our astronomy apps on this one.  grin

         
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    Posted: 19 December 2010 05:23 PM #7

    Mav - 19 December 2010 08:07 PM

    Good analysis as always.

    The “net profitability ratio” is a nice “reality check” for estimates.  Totally agreed, if we’re anywhere close to $26.5B revs, EPS is almost “guaranteed” to be over $6.00 EPS.

    My spreadsheet of historical numbers (the past year) says:  A ratio of EPS/Revenues (billions) averages out to 0.232.  26.5 * .232 = 6.15. 

    The good news is that Q1 2010 had a higher number.  The bad news is that the last 2 quarters were below .232.

         
  • Posted: 19 December 2010 05:54 PM #8

    DawnTreader - 19 December 2010 09:13 PM

    Based on the numbers I’m seeing, you’ll be dancing all night. If the guy for Georgia does bring the tequila, few of us will remember the evening’s celebration.  LOL

    I posted the topic due to the disconnect between analyst revenue forecasts and resulting eps estimates. I’m frustrated by the numbers I’m seeing from the pros.

    I will have a nice bottle of sipping a?ejo in the freezer here (probably Gran Centenario or Herradura), but I prefer to celebrate good earnings with a nice red wine smile.  When Apple hits $500, I am going to for a bottle of Selecci?n Suprema

    http://www.herradura.com/product.aspx?id=1106

         
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    Posted: 19 December 2010 07:10 PM #9

    DawnTreader - 19 December 2010 09:14 PM
    mbeauch - 19 December 2010 08:50 PM
    alice - 19 December 2010 08:40 PM
    Mav - 19 December 2010 08:07 PM

    Good analysis as always.

    The “net profitability ratio” is a nice “reality check” for estimates.  Totally agreed, if we’re anywhere close to $26.5B revs, EPS is almost “guaranteed” to be over $6.00 EPS.

    If EPS is under $6.00 and in the $5 range, would that be consider bad and cause AAPL share price to go down.


    Apple guided around 4.80 didn’t they? I would think Mars bumping into earth would be more probable than Apple reporting $5.00 eps. :bugeyed:

    No need to check our astronomy apps on this one.  grin


    http://www.theregister.co.uk/2009/06/11/boffins_track_odds_of_planetary_smashup/

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  • Posted: 19 December 2010 10:36 PM #10

    mbeauch - 19 December 2010 11:10 PM
    DawnTreader - 19 December 2010 09:14 PM
    mbeauch - 19 December 2010 08:50 PM
    alice - 19 December 2010 08:40 PM
    Mav - 19 December 2010 08:07 PM

    Good analysis as always.

    The “net profitability ratio” is a nice “reality check” for estimates.  Totally agreed, if we’re anywhere close to $26.5B revs, EPS is almost “guaranteed” to be over $6.00 EPS.

    If EPS is under $6.00 and in the $5 range, would that be consider bad and cause AAPL share price to go down.


    Apple guided around 4.80 didn’t they? I would think Mars bumping into earth would be more probable than Apple reporting $5.00 eps. :bugeyed:

    No need to check our astronomy apps on this one.  grin


    http://www.theregister.co.uk/2009/06/11/boffins_track_odds_of_planetary_smashup/

    My favorite part of this nonsensical piece:

    Astronomers believe the solar system is about 4.6 billion years old - so Earth’s about half way to retirement with only a few dents on her. Let’s just hope Mercury has insurance.
    LOL

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  • Posted: 19 December 2010 11:02 PM #11

    Before we get back on topic, plan to witness the lunar eclipse on the solsticegrin

         
  • Posted: 19 December 2010 11:05 PM #12

    Mav - 19 December 2010 08:07 PM

    Good analysis as always.

    The “net profitability ratio” is a nice “reality check” for estimates.  Totally agreed, if we’re anywhere close to $26.5B revs, EPS is almost “guaranteed” to be over $6.00 EPS.

    Thank you.

    I’ll be revising my most recent published estimates and I expect a drop in the OpEx to revenue ration to have a positive impact on results. A 70% rise in revenue will produce an even more impressive eps outcome.

         
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    Posted: 20 December 2010 12:14 AM #13

    After running the analysts Unit numbers, it looks like they’re all 6-8% light with their .eps estimates. ASPs, taxes, who knows? Maybe they just don’t wanna stick their necks out on the very public/critical .eps number?

    DT, like your rev/profit ratio number. Very similar to the what I use though I’m higher than your .215.

    [ Edited: 20 December 2010 09:24 AM by ChasMac77 ]      
  • Posted: 20 December 2010 01:52 AM #14

    ChasMac77 - 20 December 2010 04:14 AM

    After running the analysts Unit numbers, it looks like they’re all 6-8% light with their .eps estimates. ASPs, taxes, who knows? Maybe they just don’t wanna stick their necks out on the very public/critical .eps number?

    DT, like your rev/profit ratio number. Very similar to the what I use thoug I’m higher than your .215.

    Chas:

    The .215 factor is the average for FY 2010. I also expect results that exceed that factor in my next published December quarter estimates. I have an opex progression graph and data table I didn’t get a chance to publish this weekend. The results for the December quarter on opex relative to revenue are rather impressive. I will publish the graph and data table this week.

         
  • Posted: 21 December 2010 12:40 AM #15

    Mav - 19 December 2010 08:07 PM

    Good analysis as always.

    The “net profitability ratio” is a nice “reality check” for estimates.  Totally agreed, if we’re anywhere close to $26.5B revs, EPS is almost “guaranteed” to be over $6.00 EPS.

    I’m working on opt estimates for FQ1 and I see an impressive drop in the ratio of this key cost component to revenue as revenue rises in the area of 70%. This will propel eps even higher in the December quarter.