Charting The Full Impact Of Europe's Plunging Currency On U.S. Corporate Revenues

Tyler Durden's picture

When it comes to the current round of currency war between Europe and the US, Europe is winning and the US is losing, and  nowhere is this more obvious than the revenues of the largest US corporations.

Here is FactSet showing that Dow 30 companies continued to report sales declines in Europe in Q3 as a result of the surge in the US Dollar.

“Foreign exchange impacts reduced sales by 7.4 percentage points, with notable year-on-year declines in the euro, yen, and Brazilian real. These currencies devalued versus the U.S. dollar by 15%, 14%, and 37% respectively.” –3M (October 22)

Coming into the Q3 earnings season, there were concerns in the market regarding the impact of slower economic growth and the stronger dollar relative to the euro on U.S. corporate earnings for the third quarter. With the final DJIA components (Home Depot and Wal-Mart Stores) reporting results for Q3 this past week, how did companies in the DJIA perform in the third quarter in Europe in terms of sales?

How did the revenue numbers for Q3 2015 compare to prior quarters?

Overall, 11 of the 30 companies in the DJIA provided revenue growth numbers for Europe for the third quarter. Of these eleven companies, nine reported a year-over-year decline in revenues. This number is equal to the number of Dow 30 companies that reported a year-over-year sales decrease in the previous quarter (9). For seven of these DJIA companies, the third quarter marked (at least) the third consecutive quarter of year-over-year declines in revenues from Europe.

Why? Thank the Fed that topline growth is declining as a result of the soaring dollar... even if the full impact won't be felt for a long time because for some unclear reason, earnings multiples are rising even as profitability itself is declining: "The stronger dollar appeared to be a factor in the weaker revenue performance of these companies in Europe. Of the 11 companies in the DJIA that provided revenue growth numbers for Europe, all 11 cited some negative impact on revenues or EPS (or both) for Q3 due to unfavorable foreign exchange during their earnings conference calls."

At some point the Fed will say enough, and that the time has come to give US corporations the benefit of a weak currency. It will probably come just as the Fed is stuck neck-deep in its "tightening cycle."

 

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Yen Cross's picture

 BTFD... lol

 Demand is driven by ingenuity, NOT corporate buybacks, and shady boardroom deals.

 There's nothing clever about profits when the "financial deck" is loaded. Bitchez

Occident Mortal's picture

US companies should relocate to Ireland. Where they can benefit from a weak currency and low taxes.

Occident Mortal's picture

Yes that's the spirit. It's the American way.

mijev's picture

It's as American as Apple Strudel.

FlacoGee's picture

Vietnam.

China is so 2000s.

FlacoGee's picture

Hungary.

Cheaper taxes, low wages, low rents, and a cheaper currency.

Ireland is so 2000s

mijev's picture

Perhaps if Walmart stopped reporting and storing its overseas sales revenues overseas and instead repatriated the money back to the US, you know, like American companies are supposed to, then they wouldn't have as much to complain about. Except that then they couldn't avoid US taxes. My heart isn't bleeding for them.

Yen Cross's picture

  Wally World is a travesty in the making.

 Understaffed idiots . I was looking for some "premixed interior paint" las w/e and the dipshit, said they were out of it.

 He proceded to march across the store, and I found the "end-cap" > display with gallon cans of the color I wanted.

 Wally World is endemic of customer service. Lead the sheep in , and let them graze...

  The shelves were half empty, customer service was NON- existant, until you flashed a few worthless fiatskies.

  It's No wonder Wally World stock is in the shitter with Ronald Mc Donalds. lol--- I wish it wasn't a fucking joke...

mijev's picture

Agreed! They probably should change their name to Walmarx.

sun tzu's picture

Apple and Google are even worse, except they're more politically correct and hip, so they don't get any flak for not paying taxes

katchum's picture

What about the costs of importing from abroad?

mijev's picture

"What about the costs of importing from abroad?"

Or the costs of manufacturing abroad. Or paying their overseas workers in cheaper currencies. The so-called analysts at cnbc don't ask pesky questions like that. Their jobs depend on not asking.

FlacoGee's picture

Getting cheaper every day.

ajax's picture

 

 

"Getting cheaper every day."

"If we can't be free at least we can be cheap"

coast's picture

Great....the dollar is strong so a good time to travel abroad but we can't travel because of isis...lol......do you find it interesting that all this talk of Turkey, a country hardly ever mentioned, comes during thanksgiving?  Lol...

CHoward's picture

We need to come up with a country named Gravy.

nmewn's picture

And now you know why I beat on the euro.

You can thank me later ;-)

Ghordius's picture

@nmewn: eh? please explain a bit more in detail

note that if there where 19 national currencies around here instead of the EUR, they would do the same... only more

falak pema's picture

This is a catch 22 for the USD machine hegemony.

If your money is monetary safe haven its the death of your trade balance; especially as you have outsourced to CHina all your imported production.

Now we are in the monetary conundrum : If you borrow a billion from your bank (FED/TBTF $ consortium) they own you. Think Argentina. If you hold  5 trillion of their $ in your credit accounts you OWN their money and their stock exchange.

Saud and China own the petrodollar construct more and more as the US trade balance gets worse. And the WS beanstalk now lives of this debt pile in money that is a nuclear financial bomb if it ever gets dumped on the market by the creditors. The day they have their own reserve currency for the real economy.

Whence TPP and TTIP EUROZONE etc. deals to protect US corporate mega oligarchy and the dollar hegemony.