Tags: dollar | earnings | companies | revenue

WSJ: Rising Dollar May Put Kibosh on Earnings in Q3 and Beyond

By    |   Wednesday, 08 October 2014 11:24 AM

The soaring dollar — it hit a six-year high against the yen and a two-year high against the euro last week — may put a major dent into the earnings of U.S. multinational companies.

That's because the greenback's strength makes U.S. exports more expensive in foreign currency terms, and it diminishes the value of revenue earned overseas when it is repatriated to the United States. Industries that may suffer include manufacturing, consumer goods and technology.

"The rising dollar is one more headwind that those sectors don’t need," Mark Luschini, chief investment strategist for Janney Montgomery Scott, told The Wall Street Journal.

Janney Montgomery is reducing its holdings of materials and industrial stocks in light of their dependence on foreign markets.

About 46 percent of revenue for S&P 500 companies is earned abroad, according to S&P Dow Jones Indices.

Companies affected may include Alcoa, which generates 49 percent of its sales overseas and Ford and GM, which together garner 42 percent of their revenue abroad, The Journal reports.

Meanwhile, Jared Bernstein, senior fellow at the Center on Budget and Policy Priorities, takes a contrarian view of the dollar's role as the world's primary reserve currency.

"I think if the dollar were not nearly as prominent as global reserve currency we'd definitely be better off," Bernstein, formerly chief economist for Vice President Joe Biden, told Yahoo.

"By dint of the dollar being a reserve currency, we're facilitating [trade] surpluses [for foreign countries], which makes it hard for [U.S.] manufacturers to compete globally."

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The soaring dollar — it hit a six-year high against the yen and a two-year high against the euro last week — may put a major dent into the earnings of U.S. multinational companies.
dollar, earnings, companies, revenue
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2014-24-08
Wednesday, 08 October 2014 11:24 AM
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