Apple to be Biggest Drag on S&P 500 Tech Sector

Apple will be a focus company for the market during the upcoming week, as the company is scheduled to report earnings for the calendar first quarter (fiscal second quarter for Apple) on April 26. The current mean EPS estimate for the company for Q1 2016 is $2.00, compared to year-ago actual EPS of $2.33. If Apple reports a year-over-year decline in EPS for Q1 2016, it will mark the first time the company has reported a year-over-year decline in EPS since the calendar third quarter of 2013 (fiscal fourth quarter of 2013 for Apple).

Related: Aggregate Q1 Loss Expected for S&P 500 Energy

As a result, Apple is expected to be the largest contributor to the blended earnings decline for the Information Technology sector for Q1 2016. The blended (combines actual results for companies that have reported and estimated results for companies yet to report) earnings decline  for the Information Technology sector is -7.4%. Excluding Apple, the blended earnings decline for the sector would be -4.1%.

If Apple reports actual EPS equal to or below the mean EPS estimate for the quarter, it will mark the first time Apple has been the largest detractor to earnings growth for the Information Technology sector since the calendar third quarter of 2013.

iPhone Sales Driving Apple’s Substantial Contribution to Tech Sector's Earnings Decline

Over the past three years on average, the iPhone product segment has accounted for nearly 60% of the total revenues generated by Apple. In four of the past five quarters, the iPhone product segment has reported year-over-year revenue growth in excess of 35%. However, last quarter (Q4 2015), the segment reported year-over-year revenue growth of only 7%.  For Q1 2016, the segment is projected to report a year-over-year revenue decline of -18%. If the iPhone product segment does report a year-over-year decline in sales for the calendar first quarter, it will mark the first year-over-year decline in iPhone sales since FactSet began tracking sales for this product segment in the calendar fourth quarter of 2010.