It is a tough Q with every sector except tech supposed to report a decline in earnings according to BAML (via The Reformed Broker) – but things are even worse than they appear, since only one company is pulling its weight.

The S&P 500 Information Technology sector is expected to report 3% year-over-year earnings decline, excluding Apple, in the third quarter of 2015, according to FactSet.

Apple is expected to be the largest contributor to the earnings growth of the S&P 500 tech sector for the third quarter (fiscal fourth quarter for the iPhone maker). The mean EPS estimate for the tech giant for the period is $1.87 compared to its actual EPS of $1.42 in the same period a year ago.

According to FactSet, if Apple’s actual EPS is equivalent to or higher than the mean EPS estimate, it will be the fifth consecutive quarter for the company to become the largest contributor to the earnings growth of the S&P 500 tech sector.
Including Apple, the S&P 500 tech sector’s earning growth would be 2.1%.

S&P 500 Tech Sector

Apple contribution to SP 500 tech sector earning growth in 2016 not significant

FactSet noted that that the iPhone product segment of Apple recorded more than 50% revenue growth during the three previous quarters. For the third quarter, the tech giant’s iPhone segment is expected to achieve a 32% revenue growth.

Based on the year-over-year comparisons for iPhone sales, FactSet concluded that the market has become increasingly challenging for Apple starting in the fourth quarter of this year.

“Apple is not predicted to be a significant contributor to the expected earnings growth for the Information Technology sector for the first, two quarters of 2016,” according to FactSet.

Apple EPS Growth vs iPhone Sales Growth

Q3 earnings season overview

According to FactSet, 345 of the companies in the S&P 500 already reported actual financial results for the third quarter as of October 26. FactSet noted that 77% of the companies reported better-than-expected EPS compared to the five-year average. On the other hand, fewer or only 43% of the companies reported sales above estimates. Overall, the companies reported earnings that were 5.2% higher than estimates.
The combined S&P 500 companies’ (actual results for companies that already reported and estimated results for those yet to report) are expected to experience a 3.8% earnings decline for the third quarter.

The Energy and Materials sectors are expected to report the largest decline in earnings among the ten sectors of the S&P 500. The Telecom Services and Consumer Discretionary sectors are expected to record the highest earnings growth for the quarter.

The S&P 500 companies’ combined revenue decline for the quarter is now -3.5%. The Energy and Materials sectors are reporting the biggest sales declines among the ten sectors in the index.The Telecom Services and Health Care sectors are reporting the highest sales growth for the period.