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How Much Longer Will Apple Drive Earnings Growth For the S&P 500 Tech Sector?

Written by John Butters | Sep 11, 2015

Apple was a focus company for the markets this past week, as the company unveiled a number of new products (including iPhone 6s, Apple TV, and the iPad Pro) at the September Event 2015. Since many of these new products will not be available until next quarter, Apple will not likely see much impact from these products on the bottom line for the current quarter. For the current quarter, Apple is projected to report EPS growth of 32%. The mean EPS estimate for Apple for the calendar third quarter (fiscal fourth quarter for Apple) is $1.87, compared to year-ago EPS of $1.42.

As a result, 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%.

As of today, if Apple reported actual EPS equal to or above the mean EPS estimate, it would mark the fifth consecutive quarter that Apple has been the largest contributor to year-over-year earnings for the Information Technology sector. 

What is driving Apple's substantial contribution to earnings growth for the Information Technology sector in recent quarters? The iPhone product segment has reported revenue growth in excess of 50% in the previous three quarters, and is projected to report revenue growth of 31% in Q3 2015.

However, year-over-year comparisons for iPhone sales become more challenging in Q4 2015. Sales for the iPhone are projected to be down slightly (-1%) in Q4 2015. As a result, the magnitude of Apple's contribution to year-over-year earnings growth for the Information Technology sector is expected to be much smaller in Q4 2015 relative to recent quarters.