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Will Investors Get Excited If Apple Only Beats EPS By A Dime?

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This article is more than 9 years old.

One of the consequences of Apple doing a 7 for 1 stock split is that it will make any EPS beat look materially smaller than before the split. While Tim Cook has provided guidance that is more in-line with what the company actually generates over the past five quarters beating EPS by $0.10 or $0.15 doesn’t look as impressive as $0.70 or $1.05 even thought it’s the same percentage.

Back in the days when Steve Jobs was CEO Apple gave guidance that was almost ridiculously low. Starting in the June 2009 quarter when the iPhone 3GS first became available Apple beat its revenue guidance by 23% and its EPS guidance by $1.01 or 101%! It then went on to beat the high-end of September’s EPS guidance by $1.54 or 125%!

For the next 10 quarters until March 2012 Apple beat its EPS guidance by a range of $1.17 to $4.57 or 28% to 109%. Then in the June 2012 quarter Apple only beat its EPS guidance by $0.64 or 7%. While its outperformance returned to some degree in the December 2012 quarter with a 24% beat except for the March 2014 quarter (13% higher) actual EPS has only exceeded the high-end of guidance by a range of underperformance of $0.15 (minus 1%) to $0.23 (2%).

For the June 2014 quarter Apple essentially gave an EPS guidance range of $1.11 to $1.23 when you compute all the factors that were provided, the Street is at $1.23 and I am forecasting $1.28.

If Apple beats the high-end of EPS guidance and the Street by a dime at $1.33 or 8% it doesn’t look as dramatic as the pre-split $9.31 vs. $8.61 ($1.23 times 7) would have been. If the company beats EPS by $0.20, coming in at $1.43, it would have announced $10 pre-split, which would look more dramatic.

All of this of course could easily be overwhelmed by guidance for the September quarter if Apple feels comfortable that it can launch the iPhone 6 in time to generate a large amount of sales.

In the long-run it shouldn’t make a difference how much Apple beats guidance by but it could influence the short-term movement in the stock.

Source: StockCharts.com

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