Apple is expected to report its Q2 FY’25 results in early May. Earnings are projected to reach about $1.61 per share, compared with $1.53 per share in the year-ago quarter, driven by higher services revenues and share repurchases.
However, attention will focus on Apple’s outlook amid the Trump Administration’s tariff spree and the high-stakes trade war between the United States and China. U.S. tariffs on China now stand at about 245% on some imports, although electronics—including smartphones and laptops—are exempt, a reprieve that President Trump indicated would be temporary. This could be a significant setback for Apple, which, by some estimates, produces 9 out of 10 of its iPhones in China. Investors will be looking for clarity on how Apple intends to manage its supply chain and U.S. business under these circumstances. We estimate that, in a worst-case scenario, tariffs could reduce Apple’s earnings by as much as 30%. See How Apple Will Weather Tariff Storm
Apple’s market capitalization currently stands at $2.9 trillion. Over the past twelve months, it generated $396 Bil in revenue and achieved $126 Bil in operating profits with net income of $96 billion. For investors seeking upside with lower volatility than individual equities, the Trefis High-Quality portfolio offers an alternative, having outperformed the S&P 500 and delivered returns exceeding 91% since inception.
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Apple’s Historical Odds of a Positive Post-Earnings Return
Key observations on one-day (1D) post-earnings returns:
- Over the past five years, 20 earnings events have been recorded, resulting in 8 positive and 12 negative one-day (1D) returns, or about 40% positive returns.
- Notably, this rate increases to 50% when considering data from the last 3 years instead of the full 5.
- The median of the 8 positive returns is 5.3%, while the median of the 12 negative returns is –1.5%.
Additional data on observed 5-day (5D) and 21-day (21D) post-earnings returns are summarized in the table below.
Correlation Between 1D, 5D, and 21D Historical Returns
A relatively less risky strategy—though not effective if correlations are low—is to identify the strongest correlation between short- and medium-term post-earnings returns and trade accordingly. For instance, if 1D and 5D returns exhibit the highest correlation, a trader could go “long” for the next 5 days following a positive 1D post-earnings return. Below is correlation data based on a 5-year and a more recent 3-year history. Note that “1D_5D” represents the correlation between 1D post-earnings returns and the subsequent 5D returns.
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