Q1 Post Mortem Stunners: Full Year 2012 EPS Forecasts Are Down 2% YTD; Apple Represents 15% Of S&P Rise

Tyler Durden's picture

With the record first quarter in the books we perform a quick postmortem and find some stunning things, the first of which is that the 12% YTD growth in the S&P YTD has been entirely due to multiple expansion: consensus 2012 EPS has declined by 2% since the start of 2012. Why multiple expansion? Because as Goldman (this would be "bad" Goldman in the face of David Kostin, not "good" Goldman ala Peter Oppenheimer who top ticked the market two weeks ago by telling everyone to get out of bonds and into stocks) which still has a 1250 year end price target says "the ECB reduced “tail risk” via the LTRO." Which means that as of today, the market is officially overvalued: "Since December the forward P/E multiple has expanded by 10% from 12.1x to 13.2x, above its 35-year average of 12.9x" even as EPS estimates have actually declined by 2% since the beginning of the year! It gets funnier when one accounts for the outsized impact of just one company. Apple. "Apple continues to have a significant impact on sector- and index-level results. Info Tech contributed 399 bp of the S&P 500 12% YTD return, but AAPL alone accounted for 179 bp or 15% of the rise in S&P 500 during 1Q. The company constitutes 22% of the Info  Tech sector’s market cap and generates 22% of its earnings. Consensus expects year/year EPS growth in 1Q 2012 of 6% for S&P 500 and 12% for Info Tech, but excluding AAPL these expectations fall to 4% for both Tech and the index. While Information Technology was the only sector to see margin growth in 4Q 2011, margins declined without Apple. In 1Q 2012, Tech margins are expected to grow by 16 bp YoY in total, but fall 33 bp without AAPL." Finally as the chart below shows, 2012 forward EPS have been declining ever since July, when they peaked just short of 114, and are now down to just about 105. In other words: without Apple and the margin boosting impact of the LTRO, the quarter (and really last two quarters) would have been a disaster. As noted earlier (and to Spain's detriment) the LTRO effect has now phased out. How long until the Apple mania meets the same fate?

2012 full year EPS revisions YTD: down, down down, even as any potential growth is completely back end (Q4) loaded:

Starting last summer, earnings reality has set in.

Finally, it's all about Apple.

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l1b3rty's picture

When does Apple start to see the effects of Jobs death or is it just another CIA front getting pumped up the 20,000 new IRS agents KNOCKIN AT YOUR DOOR??? HOW YOU GONNA COME!??!?!?



resurger's picture

iStay puft applemallow

UP Forester's picture

Don't cross the iStreams!

Manthong's picture

I'm sure Tim Cook sleeps well at night knowing that one little hiccup at Apple could bring the whole US stock market to its knees.

GetZeeGold's picture



iFatfinger......press any key.


BrokeDayTrader's picture

Don't forget the rest of the retail mania stocks which are defying all rationality and fundamentals, like Movado, Ralph Lauren, Ross stores, Starbucks, priceline which move up every day as if the central bank itself was buying them to get the sheeple excited and start spending money that doesn't exist.

Where is the reporting on that?

What?  Names like HD going up every day for 6 months when there is no jobs, no recovery, housing is busted, consumer is broke, but Brian Sack is in there buying?

UUUGGGGGHHHHH! I'm going to hurl!

css1971's picture

Hi Robo.

I preferred the babe icon.

sitenine's picture


So, I read this on your bio: "Daytrading for 7 years, had my ups and downs, got killed shorting the last few months, I'm on my last leg now, hoping to make it all back."

hoping to make it all back - seriously?

You need help, and only you can save yourself.

Chasing yield is no way to go through life man.  Put down the crack pipe and walk away.  Just walk away.

GetZeeGold's picture



Remember......crack is wack!


junkyardjack's picture

Apple will see the same fate when their sales begin to decline, which won't be happening anytime soon

css1971's picture

Their competitors are deliberately releasing devices which are designed to remove Apple's margin entirely. They may well sell millions more, but their margins are going away.

junkyardjack's picture

We shall see.  As Apple doesn't release a new product every month they are able to exploit their products much longer than companies like Samsung that releases a new tablet every 2 months it seems.  


Samsung has released what 3 or 4 7 inch tablets in just the past 7 months with the 7 plus, 7 2 and 7.7, I'm probably missing some.  Apple releases the iPad and that stays around for a full year before the next one, they will be able to enjoy greater economies of scale than their peers do so while the Samsung and HTCs are destroying their margins to a level of unprofitability Apple will still be profitable even if margins compress.  


I'm not really sure what will cause margins to compress as the iPad and iPhone always cost the same price, everyone knows what to expect and Apple controls the software so they aren't in a Spec race like the Android crowd.  iOS will work fluidly on the device and Apple will control how much they need to build into their devices for it to work fluidly, Samsung is at the mercy of Google who will control how fast phones or tablets need to be to handle the software.  Also remember there is always someone that has money so even when things get bad if you tailor to a higher end market then there will still be people to buy your product like the Coach and Tiffany's of the world.  Apple has been moving in that direction in terms of brand.

bigbucksr's picture

that's what I don't get....sure, the IPad is an awesome and innovative product, but it is just a matter of time before it is commoditized....the avg Joe isn't gonna spend $600-800 on an Ipad...they just can't afford it...sure, the top 20% of people can, but the other 80% can't....and how many $600-800 Ipads are people going to buy....and once everyone has one, then what?

junkyardjack's picture

Well I'm not trying to vigorously defend Apple because I don't know the full scope but smartphone sales in 2011 were 491 million, Apple sold somewhere around 40 million iPads in 2011.  While Apple has a huge lead the market is still way small compared to smartphones which is way small still compared to cell phones in the rest of the world.  There is a huge market opportunity its just who is going to control it.  Android is leading in the smartphone front in terms of numbers but they haven't stuck yet with tablets.  Time will tell but its far from a situation where the market is completely saturated with ipads right now

rosiescenario's picture

No, the overpaid Foxcon workers have agreed to pay cuts if AAPL's margins show signs of contracting....

Max Fischer's picture



Their competitors are deliberately releasing devices which are designed to remove Apple's margin entirely. They may well sell millions more, but their margins are going away.

Sorry, but that's not true.  In fact, the exact opposite is true.  Apple is controlling the margins, not the competition.   

With virtually every new gadget Apple produces, the competition doesn't make it to the market until a year or so later.  This advantage enables Apple to enjoy HUGE margins until the competition begins to slowly introduce their various products to compete against the iphone, ipod, ipad, etc. Then, just as the competition begins to unveil its product, Apple slashes its prices, making it exceptionally difficult for competitors to compete, and do so profitably.  Apple rakes in as much margin as they can, then pulls the rug out from the competitor just as they're making it to the market for the first time.  Apple did it with Ipod, Iphone, and Ipad.     

If you have any questions about Apple's margins, just take a look at their financials for the past five years. 

Max Fischer, Civis Mundi 

Buckaroo Banzai's picture

Agree. Apple has written the book on this strategy which is an amazing achievement considering they have turned the normal tech profit regime (shrinking margins) on its head. They have 30 years of experience integrating hardware, software, and industrial design-- no one else has mastered two out of three, much less three out of three.

I've said it before, and I'll say it again--the market is narrowing to a point, and Apple is the point. Apple is going to be the last man standing, but when the market finally turns, it's going to be a millstone around Apple's neck, and they'll get dragged down too-- no matter how profitable they happen to be.

slewie the pi-rat's picture

don't worry! 

the fudge is in the oven!

DoChenRollingBearing's picture

When so much of the market cap is based on ONE STOCK, that usually signals danger!

Paul Atreides's picture

Everything is ok, your government is in control.

RiverRoad's picture

Does no one remember Qualcommmmm goin' to 400?????

Stagflationary's picture

Well, I have a longer memory than most of you Zeeple and I recall GS giving us two scenarios last time the S&P500 was around 1200 - one of them was a 1250 target, the other was a 900 target. 

What a trade that turned out to be...

tony bonn's picture

the magic of outliers.....the market has still not recovered to 2007 highs in spite of massive rapings of americans to keep the plutocrats well stocked in louis vitton and mercedes....the market needs a laxative to become healthy again, but said laxative would take us near 5,000 - 6,000 djia....

nobusiness's picture

Don't forget china must be selling imitation ip0ds and iph0nes by the millions by now

tickhound's picture

Good.  When is proprietary accepted to the point of fucking us?  Otherwise we are PLANNED OBSOLESCENCED to death, bitchez... with no care for anything other than profit.

I mean... WTF?  Is it so much to ask that I not have the opportunity to buy the BEST, most UPGRADABLE, LONGEST LASTING, most ENVIRONVENTALLY and overall ECONOMICALLY sustainging  product on the marketplace?  The TRUE MARKETPLACE?

when you start believing that INTERNATIONAL PATENT protection isn't creating ARTIFICIAL SCARCITY, then ure not using ure heads, bitchez.  We can choose which "fucked" hurts less.

Bill D. Cat's picture

Eggs , one basket , some assembly required .

Zero Govt's picture

"Apple Represents 15% Of S&P Rise"

Class Act

...if only America, and Europe, had more class acts instead of corporate crud, monopolists and zombie banks ....nice thought for the day



eps or wtf ever times earnings = Chinese math (thieving, cheating bullshit)!
All your eps are now belong to us.

robertocarlos's picture

So when APPL hits 1000 the good times will really be rolling.

Asher88's picture

You HAVE to see the RETINA display!!

SAT 800's picture

It was probably all just a "covering rally". Lucky thing I got out now with my 72%net profits intact; after buying BAC at $5.76, when you all, in your infinite wisdom wanted to short it. Good luck with your ignorance. You're going to need it.

cnhedge's picture

it's the financials and appl that caused the rally.

jonjon831983's picture

It's ok, they will make EVEN MORE money after the AAPL Steve Jobs movie comes out.

Nid's picture

Any dude over 50 is already Long Testicles.