Apple Inc. (NASDAQ: AAPL)’s recent stock decline is not only hurting individual investors, hedge funds, pension funds, mutual funds etc. it is hurting S&P 500 earnings. Apple’s below expectations growth is causing analysts to lower their forecasts for S&P 500 earnings. Many times analysts will calculate S&P 500 (S&P Indices: .INX ) earnings ex-financials or other groups, but now some are calculating ‘earnings ex-Apple Inc. (NASDAQ:AAPL) .’ A shocking report from late 2012 stated that five companies, Apple Inc. (AAPL), Bank of America Corp. (BAC), American International Group Inc. (AIG) and Goldman Sachs Group Inc. (GS) — contributed more than half of all the S&P 500’s earnings growth for 2012.
Analysts at Deutsche Bank are out with a new report which shows how important Apple earnings are for S&P 500 total earnings. The analysts believe that the tone of the Q4 earnings season has been solid, and guidance has been encouraging, which has firmed up 2012 EPS and improved visibility for 2013. Additionally, 4Q bottom-up S&P 500 (S&P Indices:.INX ) EPS climbed to $26.09, which puts final 2013 EPS above $103. S&P 500 managing to eke out sequentially higher EPS in a challenging quarter validates EPS sustainability. Corporate guidance was generally supportive of bottom-up 2013 EPS of $112. However, Apple has been a slight drag. However, excluding Apple Inc. (NASDAQ:AAPL)’s lowered guidance, 2013 bottom up has not changed much during 4Q reporting.
Of the 343 companies to report 66% beat on EPS with a weighted EPS surprise excluding Bank of America Corp (BAC) and Apple Inc. (NASDAQ:APPL) of 4.4%. This is better than the average EPS surprise of 3% since 2000 excluding the financial crisis. EPS surprises are led by Tech, Energy and Consumer Staples (though most retailers are yet to report). Sales beat were led by Energy and Consumer Staples.
S&P net margins have been stable. Aggregate S&P 500 net margins are tracking 9.2% for 4Q, in line with 4Q11. By sector, net margins improved on a year over year basis for Consumer Discretionary, Energy, Financials and Materials. Tech’s net margin decline of 80bp y/y was almost entirely from Apple Inc. (NASDAQ:AAPL), note analysts from Deutsche Bank.
Finally, the analysts state that 2013 Consensus S&P 500 (.INX) EPS estimates declined to $112 from $113 at year end, half of which was due to Apple (NASDAQ:AAPL). Finally, the analysts note that ‘ excluding Apple Inc. (NASDAQ:AAPL)’s lowered guidance, 2013 bottom up hasn’t changed much during 4Q reporting.’
On a positive note, the analysts note that earnings growth is healthy across S&P 500 companies. So far 343 companies, but that is equal to 80% by earnings weight. Threfore, Q4 is almost wrapped up with mostly Retailers and Utilities left to report. Q4 bottom up EPS climbed to $26.09, which places final 2013 EPS above $103. The S&P 500 is managing to eke out sequentially higher EPS in a challenging, which quarter validates EPS sustainability. Corporate guidance was generally supportive of bottom-up 2013 EPS of $112.