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The Post-Apple Q2 Earnings Scorecard - Earnings Outlook

Apple ( AAPL ) has been able to defy the law of large numbers and come out with double-digit earnings and revenue growth rates. But the iPhone maker is effectively in a league of its own, with its earnings performance and outlook not telling us much about what to expect from other operators, even in the Technology sector. That said, the magnitude of Apple's results have a bearing on the aggregate earnings picture, particularly for the Technology sector. After all, Apple alone brings in about one-fifth of the Tech sector's earnings.

Beyond Apple's strong growth rates, the picture emerging from the Q2 earning season is one of widespread weakness, particularly on the revenues side. Growth is anemic, most companies are coming short of revenue estimates and guidance continues to be on the weak side, causing estimates for the current period to come down.

The S&P 500 Scorecard ( as of 7/21/2015 )

Including the releases from Apple ( AAPL ), Microsoft ( MSFT ), Yahoo ( YHOO ) and others, we have now Q2 results from 90 S&P 500 members that combined account for a little over one-third of the index's total market capitalization. Total earnings for these 90 companies are up +4% from the period last year, with 68.1% beating earnings estimates. Total revenues for these companies are up +1%, with 38.5% beating top-line estimates.

Here is the current scorecard for the 90 S&P 500 companies that have reported results already

This is weak performance compared to what we have seen from the same group of companies in other recent quarters, as the side-by-side charts below shows.

The left-hand side chart compares the earnings and revenue growth rates for these 90 S&P 500 members with what these same companies reported in the preceding quarter and the average growth rates for these companies in the preceding four quarters (the 4-quarter average is through 2015 Q1). The right-hand side chart does the same comparison for these 90 S&P 500 members, but compares only the earnings and revenue beat ratios.

Here are the takeaways from looking at these comparison charts

  1. The earnings growth rate (+4%) is weak as it is, but become even weaker once looked at on an ex-Finance basis (+0.5%).
  2. The revenue growth rate (+1%) is notably below what we saw from this group of companies in Q1 (+2.9%) as well as in the 4-quarter average (+4.4%).
  3. The earnings beat ratio is about in-line with the recent past.
  4. The revenue beat ratio is tracking in-line with the preceding quarter, but below the 4-quarter average.

Tech Sector Update

The comparison to earlier periods is even more negative for the Technology sector, which now has Q2 results for 60.2% of the sector's market cap in the S&P 500. Total earnings for the 60.2% of the Tech sector in the index that have reported results are up +4.5% from the same period on +5.4% higher revenues, with 53.8% beating EPS estimates and 38.5% beating revenue estimates.

The chart below provides a comparison for the sector's Q2 results thus

Please note that the sector's growth comparison is worse on an ex-Apple basis. The charts below show a side-by-side comparison of the sector's growth picture, with and without Apple.

The Blended Picture

The blended (or composite) picture for Q2, combining the actual results from the 90 S&P 500 members with estimates for the still-to-come 410 index members is for total earnings to be down -3.9% from the same period last year on -4.7% lower revenues. The table below provides a summary composite picture for the quarter.

Our weekly Earnings Trends report, coming out on Wednesday will give a detailed update on the Q1 earnings season. But if you want to see our last Earnings Trends report, you can find it here .

Note : In order to get an email alert each time this author publishes a new article, click on the 'Follow Author' link at the bottom of the top-right box of links. In addition to this pre-market open daily article about the market, economy, and the corporate earnings picture, Sheraz also provides detailed earnings analysis in his weekly Earnings Trends and Earnings Preview reports.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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