A push-pull dynamic is playing with fourth-quarter results: Apple, fellow technology firms and health care companies push S&P 500 earnings forward, while the reeling energy sector pulls them back.
As of Friday, with 64% of the S&P big-cap companies having reported, earnings are expected to show a 6.4% year-over-year gain, with revenue up 1.8%.
So far, 72% have beat analysts' profit estimates and just 17.1% missed, says Thomson Reuters. Since 1993, typically 63% beat . In the past four quarters, 69% did.
The S&P health care and tech did even better, with 88% of both sectors beating estimates.
Technology profits are on track for a 17.3% gain, nearly double the 8.9% expected back on Jan. 1. Revenue is likely to rise 9%, more than double estimates.
Life Without An Apple
But most of that reflects blowout results from just one company: Apple (AAPL). For its fiscal Q1 ended Dec. 27, the tech titan earned $3.06 a share, up 48%, with net income of $18 billion. Sales soared 30% to $74.6 billion, its best gain in 11 quarters, as 74.5 million iPhones sold.
Excluding Apple, tech earnings are up 8.8% and sales 4%.
For the S&P 499, profits should rise just 4.4% and sales 1.2%.
Take away Apple, and the entire S&P 500 grew profit just 4.4% instead of 6.4%, said Thomson Reuters, blending those that have reported already with estimates for the balance.
Tech has been the biggest surprise. But S&P 500 health care companies are on track for the biggest gains: up 22.5% for earnings and 11.5% for sales.
Gilead Sciences (GILD) EPS spiked 342% and sales 134% on hepatitis-C drugs Sovaldi and Harvoni.
The collapse of crude oil prices since the summer has sent the energy sector into a tailspin. Energy profit fell about 21.2% in Q4 while revenue plunged 13.7%.
Exxon Mobil (XOM) cited declining oil prices for its steep drop in 2014's Q4 revenue. Its net income fell 21% to $6.57 billion.
Exclude energy — but include Apple — and the S&P 500 would be on track for a 9.9% earnings gain and 4.4% revenue rise.
The outlook for energy is even more bearish, with analysts anticipating sector earnings falling 61.8% in Q1 and 60.6% in Q2.
Thanks to energy — and the strong dollar's impact on multinationals — forecasts are gloomy for the overall S&P 500. Analysts forecast Q1 earnings to slip 1.4% while revenue falls 1.9%. Q2 earnings are expected to grow a meager 0.7% while revenue once again falls 1.9%.
"That's really where you see some alarm," said David Aurelio, research analyst at Thomson Reuters. "That's all driven by energy.
Analysts expect solid earnings and sales growth in Q1 and Q2 outside of energy.