Tuesday, April 23, 2019

The Trouble in the IT Sector

This earnings season looks like it might be a rough one for IT. According to FactSet, the information-technology sector of the S&P 500 index is expected to see earnings drop about 10.6 percent from last year. It is one of just three S&P sectors projected to experience a double-digit percentage decline; the entire index is expected to see earnings drop about 3.9 percent.

One reason for this: The S&P 500’s IT sector no longer includes internet companies like Alphabet, Facebook, Twitter and Netflix. They have all been moved into the new communications services sector, which is expected to see earnings fall by 1.3 percent.

Last year’s tax reform is another factor. IBM, for instance, has seen its net income decline by more than 13 percent, thanks in large part to a huge tax benefit it enjoyed in the first quarter of 2018.

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