Apple’s (NASDAQ:AAPL) earnings report changed the big-picture view of the Q4 earnings season in a material way. Prior to Apple’s blockbuster report that brought in roughly $18 billion in earnings, about $5 billion more than the year-earlier period, the aggregate Q4 growth rates were tracking below other recent quarters. The aggregate Q4 revenue growth rate is still on the low side compared to other recent quarters, but the overall earnings growth picture looks a lot better following the Apple release.
The charts below provide a side-by-side comparison of the Q4 earnings and revenue growth rates for the 148 S&P 500 companies that have reported results, with and without Apple in the numbers (the left side is with Apple and the right side is excluding Apple). The comparisons are with what we have seen from the same group of companies in 2014 Q3 and the average of the preceding four quarters.
Apple is undoubtedly giving the Q4 growth picture a boost. But the big banks, particularly Citigroup (NYSE:C) and J.P. Morgan (NYSE:JPM), were having the opposite effect earlier on. In a way, one could say that the roughly $5 billion year-over-year earnings gain at Apple is more than offsetting the roughly $2.7 billion negative comparison at Citi and J.P. Morgan combined.
The conflicting effect of Apple and the big banks on the Q4 earnings picture notwithstanding, a common theme in the reports thus far is the impact of a strong dollar and sharp fall in oil prices. The oil price impact hasn’t been restricted to the Energy sector alone, even companies like Caterpillar (NYSE:CAT)- have been affected.
Estimates for Q4 had fallen more than normal due to the oil development and we are seeing the trend play out in a big way in estimate revisions for the current and following quarters. In fact, the magnitude of energy-driven negative revisions for 2015 Q1 and Q2 is so severe that the first half of 2015 earnings growth rate for the S&P 500 index as a whole has almost evaporated.
The chart below shows what is happening to 2015 Q1 and Q2 earnings estimates for S&P 500 companies.
