Most S&P 500 sectors are expected to
show earnings declines; health care is an exception
Cigna’s quarterly sales per share are expected
nearly to double, even with significant dilution from issuing shares to help
pay for its acquisition of Express Scripts.
Despite all the good
economic news, earnings growth is expected to slow to a crawl this year for
large U.S. companies. It may also surprise you that the health-care sector is
seen as one of the exceptions.
During the first quarter of 2019, earnings per
share declined from a year earlier for six of the S&P 500’s SPX, +0.45% 11
sectors. These are the five that countered the trend, according to S&P
Global Market Intelligence:
S&P 500 sector
Increase in Q1 EPS
Health
Care
9.8%
Real
Estate
7.4%
Financials
6.2%
Industrials
5.9%
Information
Technology
4.0%
Source: S&P
Global Market Intelligence
For the second quarter,
consensus estimates among analysts polled by S&P Global Market Intelligence
are for the S&P 500’s weighted aggregate EPS to increase 2.2% from a year
earlier. Even so, all but these three sectors are expected to show declines:
S&P 500 sector
Expected increase in Q2 EPS
Financials
4.3%
Health
Care
2.0%
Industrials
0.2%
Source: S&P
Global Market Intelligence
Health
care is one of the stock market’s healthiest sectors right now
(Bloomberg) — Wall
Street hasn’t been this down on Apple Inc. in a long time.
Rosenblatt
Securities downgraded the company to sell on Monday, bringing the total number
of bearish analysts up to five, among the 57 ratings tracked by Bloomberg. Five
is the highest number of sell ratings the iPhone maker has had since at least
1997, according to historical data compiled by Bloomberg. To put that into
context, Apple wouldn’t release its iMac computer until August 1998, and the
iconic iPod wouldn’t debut until October 2001.
In another sign of
the growing caution around the company, Apple’s consensus rating — a proxy for
the company’s ratio of buy, hold, and sell ratings — is currently 3.76,
according to Bloomberg data. That’s the lowest since 2004.
Skepticism
surrounding the company has accelerated in 2019, with all five of the sell
ratings coming in this year. Both New Street Research and HSBC lowered their
ratings on the stock to sell in April, and in January, the number of firms with
buy ratings dropped below 50% for the first time since 2004.
The caution has
been largely driven by uncertainty surrounding demand for the company’s
critical iPhone line, with the U.S.-China trade war seen as a particular
headwind. In January, Apple cut its revenue outlook for the first time in
almost two decades, in large part because of iPhone weakness. Apple’s
third-quarter results are currently expected to come out on July 30.
According to data
compiled by Bloomberg, more than 60% of Apple’s 2018 revenue was related to the
iPhone, while roughly 20% came from China, which is also a critical part of its
supply chain. Last week, Citi wrote that Apple’s China sales “could be cut in
half” due to “a less favorable brand image desire.”
Rosenblatt’s
downgrade came as analyst Jun Zhang expects the company “will face fundamental
deterioration over the next 6-12 months,” based on disappointing sales trends.
The downgrade pushed Apple stock lower by as much as 2.9% in Monday trading.
Still, the
sell-equivalent ratings hardly represent a consensus view. A plurality of 23
firms recommend buying the stock, while another 21 have hold ratings, according
to data compiled by Bloomberg.
The 2019 caution
hasn’t really been reflected in Apple’s stock performance. Shares are up more
than 40% from its January low, though they remain about 14% below record
levels.
The news was not
entirely negative for Apple on Monday, however, as Wedbush wrote it was
“incrementally more positive on global iPhone demand” following checks in Asia.
“We saw a ‘slight uptick’ out of Apple suppliers during our checks although
overall handset demand remains challenging,” analyst Daniel Ives wrote. He
affirmed his outperform rating and $235 price target.
(Adds context in second
paragraph, consensus rating in third, and stock performance in ninth.)