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Slowing Mobile Sales Upset the Apple Cart Again in Q2

Earnings

By John Butters  |  July 26, 2016

Apple will be a focus company for the market during this week, as the company is scheduled to report earnings today. For the calendar second quarter (fiscal third quarter for Apple), the current mean EPS estimate is $1.40, compared to year-ago actual EPS of $1.85. If Apple reports a year-over-year decline in EPS for Q2 2016, it will mark the second straight quarter that the company has reported a year-over-year decline in EPS. The last time Apple reported two consecutive quarters of year-over-year earnings declines was Q2 2013 through Q3 2013 (fiscal Q3 2013 through Q4 2013 for Apple).

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As a result of this projected decline in EPS, Apple is expected to be the largest contributor to the expected earnings decline for the S&P 500 Information Technology sector for Q2 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 -3.9%. Excluding Apple, the blended earnings growth rate for the sector would be 2.2%.

iPhone Sales and Apple's Growth

As of today, if Apple reports actual EPS equal to or below the mean EPS estimate for the quarter, it will mark the first time that Apple has been the largest detractor to earnings growth for the Information Technology sector for two consecutive quarters since Q2 2013 through Q3 2013.

Related Story: Falling Apple Pulls Down Tech Sector

What is driving Apple’s substantial contribution to the earnings decline for the Information Technology sector for Q2 2016?

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Over the past three years on average, the iPhone product segment has accounted for about 60% of the total revenues generated by Apple. From Q1 2014 through Q4 2015, the iPhone product segment reported average year-over-year revenue growth of 31%. However, last quarter (Q1 2016), the segment reported a year-over-year decline in revenues of -18%. For Q2 2016, the iPhone product segment is projected to report a year-over-year decline in revenues of -22%.

 

John Butters

Vice President, Senior Earnings Analyst

Mr. John Butters is Vice President and Senior Earnings Analyst at FactSet. His weekly research report, “Earnings Insight,” provides analysis and commentary on trends in corporate earnings data for the S&P 500 including revisions to estimates, year-over-year growth, performance relative to expectations, and valuations. He is a widely used source for the media and has appeared on CNBC, Fox Business News, and the Business News Network. In addition, he has been cited by numerous print and online publications such as The Wall Street Journal, The Financial Times, The New York Times, MarketWatch, and Yahoo! Finance. Mr. Butters has over 15 years of experience in the financial services industry. Prior to FactSet in January 2011, he worked for more than 10 years at Thomson Reuters (Thomson Financial), most recently as Director of U.S. Earnings Research (2007-2010).

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