Apple Propping Up S&P Earnings, Says Barclays

This morning brings yet another installment of the Apple (AAPL) effect upon the broader market.

Barclays Capital‘s equity strategists Barry Knapp and ?Eric Slover write that Apple made up 15% of the Standard & Poor’s 500 Index’s 12% rise this year, which they characterize as the stock “contributing over four times its weight in the index.”

The two also note that Apple has offset 40% of the year-to-date decline in the S&P’s 2012 projected EPS.

The authors see very few parallels for double-digit contribution to the index from a single stock, the closest precedent being Microsoft (MSFT) in the ’90s:

Over the past ~20 years, a double-digit contribution from a single stock (>10%) in a double-digit market return environment (>10%) is much less frequent. In fact, we have to look all the way back to 1999 to find other such observations (January/February 1999 and December 1999), when another tech giant, MSFT, was responsible for these large contributions.

This is not, of course, 1999, the authors note: “The S&P 500′s trailing PE ratio is ~14x, compared with ~27x in 1999, and AAPL’s trailing PE is ~17.5x, compared with MSFT’s ~70x in 1999.”

However, they do see “concentration risk” in Apple’s large effect.

Apple will have a disproportionate effect again in the current quarter’s earnings report for the Index, the authors expect. Stripping out Apple, probably the S&P is headed for a rather weak earnings report:

Earnings growth is estimated at just 1.4% y/y, and about zero excluding AAPL. It seems likely that results will wind up somewhat better than expected, given a post-recession median positive surprise ratio of ~70%. However, even tacking on last quarter’s ex-AAPL earnings surprise of 230bp, this quarter is setting up for 2% y/y growth, which would make this the worst growth rate since the recovery began.

The Barclays note is typical of a spate of recent reports indicating Apple’s outsized impact on the major indices. A similar report on Monday from Merrill Lynch equity strategist Dan Suzuki showed that Apple was singularly responsible for lifting average S&P 500 earnings above estimates in Q1.

Apple shares today are down $6.55, or 1%, at $611.07.

Fin