S&P 500 Companies On Track For Double-Digit Earnings Growth, Despite Apple Disappointment

Apple Inc. AAPL shocked the Street with a negative pre-announcement that triggered a sharp move to the downside. Given that corproate profits were a driving force behind the economic expansion seen after the Great Recession, the reaction shouldn't have come as a surprise. 

Double-Digit Profit Growth 

Despite the chilling effect of Apple's announcement, corporate profit growth is still going strong, according to Factset's latest Earnings Insight report.

The firm projects an 11.4-percent earnings growth rate for S&P 500 companies in the fourth quarter, marking the fifth straight quarter of double-digit growth, but a slowdown from 26-percent growth in Q3.

The Q4 estimate could go as high as 15 percent, Factset said. The logic behind the deduction is derived from the historical average change in earnings growth that factors in positive earnings surprises.

"Over the past five years on average, actual earnings reported by S&P 500 companies have exceeded estimated earnings by 4.8 percent," Factset said in the report. With about 71 percent of S&P 500 companies reporting positive earnings surprises, the earnings growth rate typically increases by 3.8 percentage points from the end of the quarter through the end of the earnings season.

Source: Factset

Apple Dents Expectations

The 11.4-percent earnings growth forecast by Factset is a scale back from the previous week's 12.4-percent estimate. Apple's revenue warning led to a downward adjustment of the consensus EPS forecast for the technology giant from $4.66 to $4.21.

Energy Sector To Lead The Pack

Among the 11 S&P sectors, energy companies are expected to report the strongest year-over-year earnings growth, with an estimated boost of 74.6 percent. Industrials, with an expected 14.5-percent earnings growth rate, take the second spot, followed by financials with 13.6-percent growth. The newly carved-out communications sector is expected to closely follow with 13.3-percent profit growth.

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