Ask Matt: How bad will Apple's profit be?

Q:  How bad will Apple's profit be?

A: Apple’s (AAPL) second quarter could be a classic example of why enormous companies have trouble being great stocks. The bigger a company gets, the harder it is to keep the growth needle moving in the right direction.

By initial impressions, Apple is expected to have a bonanza of a quarter in terms of raw profit when it reports Tuesday. The gadget market is expected to earn $7.6 billion during the quarter, which dwarfs all other companies in the Standard & Poor’s 500.  That’s a massive profit and explains why Apple has a higher market value than any other U.S. company. But the stock leading up to the results has been a huge disappointment. While the S&P 500 sets new all-time highs, shares of Apple are down by more than 20% over the past year. While Apple has size, its growth days are over for now. The company’s adjusted profit per share is expected to drop by 25% to $1.38 a share in the second quarter. The company’s newer smartphones lack the innovation of earlier models, so many consumers are replacing them less frequently. Meanwhile, Apple’s high price point is challenging as equally capable phones from rivals are more popular in emerging markets and in areas where consumers are highly price conscious. The company's profit could beat expectations for the quarter, but the outlook isn’t much better. Adjusted profit this calendar year is seen falling 15%.

USA TODAY markets reporter Matt Krantz answers a different reader question every weekday. To submit a question, e-mail Matt at mkrantz@usatoday.com or on Twitter @mattkrantz.