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Apple Is the Earnings Bellwether: Analysts

Monday, 9 Apr 2012 | 3:24 PM ET
AP

The official outlook for the next round of corporate earnings is pretty grim .

The Standard & Poor’s Capital IQ survey, forecasts that earnings will have grown 0.93 percent in the first quarter, the slowest rate in three years.

But low expectations will make for positive surprises this time, says Stanley Crouch, CIO of Aegis Capital, largely because of one very influential company.

“The 8,000-pound gorilla in this mix is definitely Apple,” said Crouch. “Its weighting in the (S&P 500 index) is critically important, and its a sunny side of the street company. It’s hard to believe Apple will disappoint.”

Apple’s weighting in the S&P 500 index is 4.7 percent. To put this in perspective, if every company had an equal weight in the index, it would be about 0.2 percent.

This is also why Douglas Roberts, Channel Capital Research founder, calls Apple an earnings “bellwether.”

“You really have to look at Apple as a bellwether, simply because most people are buying baskets of stocks as opposed to individual stocks. And indexes like the Nasdaq and S&P 500, where Apple has a significant percentage, are affected,” saidRoberts.

A Look Ahead to Earnings
Insight on expectations for this coming earnings season, with Stan Crouch, investment pro; Fred Hochberg, Export-Import Bank; Douglas Roberts, Fed expert; and CNBC's Brian Shactman & Kelly Evans.

Roberts also thinks, however, that if you exclude Apple, the first quarter would be negative. As he spoke, things weren’t looking good. The Dow Jones Industrial Average, S&P 500, and Nasdaq Composite Index hit their lowest levels in a month during Monday afternoon trading.

“Apple is the engine, and it’s benefiting from a dovish Federal Reserve. Would Apple be trading where it is right now if short-term bonds were yielding 4 to 5 percent? No. If people had an alternative, they wouldn’t take the risk," added Roberts.

The first-quarter earnings season begins with Alcoa after the bell on Tuesday.

Additional News: Weak Jobs Report Could Test Market Bull
Additional Views: Low Growth in Earnings Is Expected ______________________________

CNBC Data Pages:

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Disclosures:

Stanley Crouch personally invests in AAPL call options. Aegis Capital's accounts do not contain Apple stock.

Disclaimer

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Follow Jennifer Leigh Parker on Twitter @jparker741 .

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