Most people would agree that Apple is the leading technology firm in the world today, and the iPhone and iPad maker’s stock performance over the last several years has reflected the continuing growth and innovation that everyone has come to expect from the company. Apple’s stock-split fueled performance over the last few quarters has been one of the few bright spots in a technology sector roiled by volatile markets and global economic uncertainty.
A September 11th report from FactSet Insight highlights just how much the S&P 500 index has come to rely on Apple for earnings growth, and the worrisome implications of this situation for the overall index.
FactSet Senior Earnings Analyst John Butters notes that “Apple is currently expected to be the largest positive contributor to year-over-year earnings for the Information Technology sector for Q3 2015. The estimated earnings decline for the Information Technology sector is -0.4%. Excluding Apple, the sector would report a year-over-year decline in earnings of -5.9%.”
Paul J. Isaac's Arbiter Partners returned -19.3% in the third quarter of 2021, according to a copy of the hedge fund's quarterly investor correspondence, which ValueWalk has been able to review. Following this performance, the fund's return sits at -1.6% for the year to the end of September. In comparison, the S&P 500 returned 15.9%, Read More
All about Apple
Apple is the heart and soul of the S&P 500 tech sector. Consensus analyst estimates are for Apple to report an EPS growth of 32% for the ongoing quarter. The mean EPS estimate for Apple for the calendar third quarter (fiscal fourth quarter for Apple) is $1.87, relative to an EPS of $1.42 last year.
Butters highlights that if Apple does report EPS to meet analyst estimates, it will be the fifth quarter in a row that Apple has been the largest contributor to year-over-year earnings for the IT sector.
Apple makes money from a variety of products and services, but iPhones are the linchpin of the franchise. Keep ion mind that the iPhone segment has reported revenue growth greater than 50% for three quarters in a row, and according to analysts, is looking at a remarkable 31% revenue growth in the third quarter.
Nothing lasts forever, not even Apple growth
Butters also highlights, however, that Apple’s historic growth run has to slow down some time, and that time could here soon. If fact, sales for the iPhone are anticipated to be off by at least 1% in the fourth quarter of 2015. This means Apple’s contribution to year-over-year earnings growth rate for the S&P 500 IT sector will probably be notably less, and the overall IT sector earnings growth rate is also likely to slip into negative territory.