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How Far Have Apple's Earnings Estimates Fallen During the Coronavirus?

Benjamin Rains

Apple AAPL flashed early warning signs to Wall Street about how the coronavirus might impact companies with exposure to China, and that was all the way back on February 17. Since then, the global pandemic has brought much economic activity to a halt and forced giants like Apple and Nike NKE to close stores.

Early Coronavirus Setbacks

Apple in a February 17 statement said it didn’t expect to meet its previously announced revenue guidance. The firm pointed to coronavirus-based setbacks as the reason it would likely fall short of its sales guidance, which it provided when it wowed Wall Street with its first quarter results at the end of January.

Apple said at the time that the deadly coronavirushad disrupted iPhone production in China and negatively impacted demand in the key Chinese market. The company has slowly tried to get back to something close to normal operations in the world’s second-largest economy.

 

 

 

 

 

 

Outlook

Apple on March 13 announced that it would close all of its “retail stores outside of Greater China until March 27.” Clearly, things have gotten even worse in the U.S. since AAPL’s mid-march announcement and its stores aren’t likely to open at least until President Trump and the White House end the call for social distancing, which is currently in place until the end of April.

Customers can still shop for Apple products online. Plus, the company has been expanding its non-iPhone business in recent years. This includes its key services unit, which features its app store, Apple Music, its new Apple TV+ that hopes to compete alongside Netflix NFLX, and more.

Despite its diverse portfolio, the company’s top and bottom-lines are both expected to take a hit. Our current Zacks estimates call for Apple’s Q2 fiscal 2020 sales to slip 4.9% from the year-ago period to hit $55.20 billion.

This estimate comes in roughly 18% below the high-end of its initial guidance—which called for between $63 to $67 billion. Investors should also note that Apple’s Q2 fiscal 2019 sales fell 5%. Peeking ahead, its third-quarter revenue is expected to dip nearly 2%.

Meanwhile, Apple’s adjusted quarterly earnings are projected to fall 10.2% against the prior-year quarter to hit $2.21 a share. This expected downturn looks even worse considering that Apple’s adjusted EPS also dipped 10% in the second quarter of fiscal 2019.

 

 

 

 

 

 

Bottom Line

Overall, we can see that AAPL’s consensus Q2 earnings estimate has tumbled 26% from the $2.99 a share it was at 60 days ago, with its third-quarter figure nearly 15% lower. Yet, Apple is clearly not alone, with the broader S&P 500’s earnings expected to fall due to the coronavirus economic downturn (also read: Taking Stock of the Earnings Picture Amid the Coronavirus Pandemic).

Uncertainty remains the name of the game for now, despite the fact that the S&P has surged nearly 20% from its March 23 lows. Apple stock has climbed as part of this larger rally and still rests over 18% off its 52-week highs.

Apple is set to release its official Q2 fiscal 2020 financial results on Thursday, April 30, just one day after Microsoft MSFT.

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