In a press release on Monday, Apple noted that March guidance would change. The primary reasons for this change? In short, coronavirus. Manufacturing issues are expected to constrain iPhone supply and retail store closures will dampen demand.
While the ultimate economic impact of the coronavirus remains largely uncertain, these issues faced by Apple are expected to affect a broad swathe of S&P 500 companies.
With this news, we can make a first 'stab' at virus’s impact on S&P 500 1Q2020 EPS.
• Sell-side analysts cut AAPL EPS forecasts by ~$0.15 this Monday morning (their best guess), which translates to a ~$650 million impact on $12.5 billion of quarterly net income, or roughly 5%.
• Assuming a 5%, 10% or 15% impact on 1Q2020 EPS for those exposed (50% of the S&P 500 per our estimate), this implies $1.00 to $3.00 of total negative impact on S&P 500 EPS per our analysis (see below).While I see an impact to earnings for Q1, I also expect that there will be a snap back of activity post-Corona. Hence, I expect the $1.00 to $3.00 of negative EPS impact to be fully recovered in 2H2020 EPS. The fact that the earnings impact could be -$8 billion to -$25 billion also points to increasing likelihood of fiscal stimulus from ...