{"id":68189,"date":"2015-02-17T05:30:07","date_gmt":"2015-02-17T10:30:07","guid":{"rendered":"http:\/\/countingpips.com\/?p=68189"},"modified":"2015-02-17T07:09:39","modified_gmt":"2015-02-17T12:09:39","slug":"strong-u-s-dollar-dampens-earnings","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2015\/02\/strong-u-s-dollar-dampens-earnings\/","title":{"rendered":"Strong U.S. Dollar Dampens Earnings"},"content":{"rendered":"
February 17, 2015<\/div>
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By WallStreetDaily.com<\/span><\/a> \"U.S.<\/p>\n

By Chris Worthington<\/a>, Editor-in-Chief of Income<\/em><\/p>\n

Since mid-July 2014, the U.S. dollar has been on a tear. In that time, the Dollar Index has shot up over 17%.<\/p>\n

If you had a European vacation planned for this spring, that\u2019s great news. But the dollar\u2019s charge hasn\u2019t been quite as welcome for many U.S.-based multinational corporations<\/a>.<\/p>\n

Indeed, earnings season has been hard on a number of the market\u2019s biggest companies. Here\u2019s what you need to know going forward\u2026<\/p>\n

As the U.S. dollar strengthens, it puts a strain on domestic firms with significant overseas revenue. That\u2019s because, when foreign currencies lose value relative to the dollar, profits translated back into dollars are diminished. Not surprisingly, this can lead to poor revenue comparables and even earnings misses.<\/p>

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And the pain isn\u2019t confined to just one industry, either. Let\u2019s take a look at a few of the areas feeling the headwinds from a strong U.S. dollar<\/a>\u2026<\/p>\n

Area #1: Beverage Companies. <\/strong>Two titans of the beverage industry, PepsiCo<\/strong> (PEP<\/a>) and Coca-Cola<\/strong> (KO<\/a>), both admitted to feeling the negative effects of the currency exchange in their recent earnings transcripts.<\/p>\n

Coca-Cola reported that fourth-quarter earnings per share (EPS) faced a 10% currency headwind, while it expects a 5% hit to net revenue and a 7% to 8% blow to profit before tax for full year 2015.<\/p>\n

Pepsi was a bit less specific, but admitted that foreign exchange effects would be a \u201csignificant\u201d drag on earnings.<\/p>\n

Area #2: Consumer Discretionary. <\/strong>Manufacturing giant, Procter & Gamble<\/strong> (PG<\/a>), announced earnings on January 27, and the news wasn\u2019t good. In the most recent quarter, PG experienced $450 million in after-tax foreign exchange charges, which put the fiscal year-to-date total at $650 million.<\/p>\n

The company projects the total impact over the course of the fiscal year at $1.4 billion, which it calls the most significant fiscal year currency impact it\u2019s ever incurred.<\/p>\n

Area #3: Technology. <\/strong>Tech companies haven\u2019t been immune to the dollar\u2019s relative strength, either. Microsoft<\/strong> (MSFT<\/a>), for instance, reportedly expects a 4% hit to revenue growth in the quarter ending in March because of U.S. dollar appreciation.<\/p>\n

Even Apple <\/strong>(AAPL<\/a>), the company with the world\u2019s largest market cap, recently admitted that currency headwinds are taking a toll on its results. In its second-quarter 2015 forecast, Apple believes its gross margins and growth rate will be 1% and 5% lower, respectively, than they could\u2019ve been without such strong dollar appreciation.<\/p>\n\n\n\n
Editor\u2019s Note:<\/strong> The dollar isn\u2019t the only currency that\u2019s gaining strength right now. Our research indicates that a new alternative currency has been making some serious waves. In fact, dozens of Wall Street banks \u2013 including Morgan Stanley, BlackRock, Credit Suisse, Bank of New York Mellon, and Bank of America \u2013 are already amassing positions alongside this currency in their \u201cin house\u201d accounts. Click here for the full story<\/a>.<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

What Does It All Mean?<\/h2>\n

Clearly, foreign exchange<\/a> headwinds are taking their toll. But what does that mean for us as investors?<\/p>\n

Ultimately, not much. Most everything is cyclical, currencies included\u2026 but anticipating currency movements can be incredibly difficult. Of course, that hasn\u2019t stopped everyone from searching for foreign companies when the dollar is weak, and vice versa. But much like timing the market, investing based on where you think the dollar will go is a failed proposition.<\/p>\n

Instead, the best way to weather currency volatility is to continue investing in undervalued companies that are growing their dividends<\/a>. Over time, this simple strategy will easily outperform\u2026 So stick with it, and you should be just fine no matter what the dollar does.<\/p>\n

Good investing,<\/p>\n

Chris Worthington<\/p>\n

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The post Strong U.S. Dollar Dampens Earnings<\/a> appeared first on Wall Street Daily<\/a>.<\/p>\n

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 <\/p>\n","protected":false},"excerpt":{"rendered":"

By WallStreetDaily.com By Chris Worthington, Editor-in-Chief of Income Since mid-July 2014, the U.S. dollar has been on a tear. In that time, the Dollar Index has shot up over 17%. If you had a European vacation planned for this spring, that\u2019s great news. But the dollar\u2019s charge hasn\u2019t been quite as welcome for many U.S.-based […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-68189","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/68189","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=68189"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/68189\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=68189"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=68189"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=68189"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}