And You Thought Q2 Earnings Were Bad?

Tyler Durden's picture


In a world of slow stagnating growth, foreign exchange variations can have a dramatic impact on top and bottom lines - especially in a market where hedges are flummoxed by government-influenced gap-after-gap and mismatch. As Goldman notes the headwinds of FX into Q2 are acute and have been painful for multi-nationals - with several high-profile companies missing and or adjusting down forecasts due to the rise of the US dollar. In spite of all the focus on Q2 earnings, we remind investors that Q3 and Q4 will also see significant currency headwinds - an impact we (and Goldman) believes is far from priced in for many companies in the market - a total top-line drag of over 5% YoY.

The year-over-year impact of FX rates has become a drag on growth for the typical multinational in 2012

YOY changes assuming current spot rates of 1.23 USD/EUR, 1.56 USD/GBP and JPY/USD 78.60 hold through the rest of the year


Via Goldman Sachs:

  • Our model estimates that FX boosted the top line of a typical multi-national company by nearly 2.5% in 2011, but that the yoy changes should result in close to a 2.6% headwind this year – a total expected yoy drag of more than 5%.
  • We emphasize the continuation of the FX drag as we enter 3Q, where we model relative 7% yoy deterioration due to FX, based on current spot rates.
  • During the on-going 2Q reporting season several multi-national companies have cited FX as a considerable headwind.
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Tue, 08/07/2012 - 22:24 | 2686530 realtick
realtick's picture

At least Apple always beats...oh wait.

Tue, 08/07/2012 - 22:37 | 2686561 Dr. Engali
Dr. Engali's picture

Don't worry the iPhone 10.5 is coming out soon that will help save earnings.

Tue, 08/07/2012 - 22:49 | 2686582 booboo
booboo's picture

Apple is going to get sauced in Q3 but I ain't laying any money on the velvet in this back alley casino.

Tue, 08/07/2012 - 22:51 | 2686584 sablya
sablya's picture

But an iPhone without google: at least no youtube, nor google maps.  That may hurt both Apple and Google's bottom lines.

Tue, 08/07/2012 - 23:49 | 2686609 HD
HD's picture

I just bought a Nexus 7 and I'm (so far) very impressed. Apple was the only game in town and enjoyed a virtual monopoly - the Kindle Fire and no name tablets were a joke. Google is going for Apples throat - and Google Fiber will be a game changer.

Wed, 08/08/2012 - 01:37 | 2686825 HaroldWang
HaroldWang's picture

Very different products for different uses but I agree. Apple must make a smaller tablet. 

Also, anyone who mentions Kindle Fire as a viable tablet is insane. Nexus is a reall tablet in that format. Fire and AMZN need to get a reality check.

Tue, 08/07/2012 - 22:25 | 2686532 Neethgie
Neethgie's picture

why is goldmans model assuming the spot of 1.23 eur/usd when stolper says its definitely going to 1.30....

Tue, 08/07/2012 - 23:00 | 2686597 Jlmadyson
Jlmadyson's picture

Uggh, pay no attention to that!

Tue, 08/07/2012 - 22:29 | 2686536 Dr. Engali
Dr. Engali's picture

Well if that's Goldmans model we all know what that means. Blowout earnings this quarter. Just assume the opposite.

Tue, 08/07/2012 - 22:27 | 2686538 AssFire
AssFire's picture

I love a good head wind.

Tue, 08/07/2012 - 22:34 | 2686543 Dr. Engali
Dr. Engali's picture

I love receiving good head.

Tue, 08/07/2012 - 22:42 | 2686566 francis_sawyer
francis_sawyer's picture

take a walk on the wild side...


Tue, 08/07/2012 - 23:30 | 2686642 roadsnbridges
roadsnbridges's picture

See below.

Tue, 08/07/2012 - 22:28 | 2686539 JackT
JackT's picture

Why does it sound like we are sailing a ship?

Tue, 08/07/2012 - 22:32 | 2686548 AssFire
AssFire's picture

shiver me timbers mate! this vessel runs on government act like you fuckin think you built it.

Tue, 08/07/2012 - 23:31 | 2686633 slewie the pi-rat
slewie the pi-rat's picture

b/c we are rudderless in a sea of fraud; becalmed; and sinking in an entire school , er...  university of sharks?

Wed, 08/08/2012 - 01:10 | 2686785 OpenThePodBayDoorHAL
OpenThePodBayDoorHAL's picture

let's see I think it's a murder of crows, a gaggle of geese, and a confederation of dunces

Tue, 08/07/2012 - 22:29 | 2686541 Michelle
Michelle's picture

Ah hell, don't worry, they'll just implement a NEW AND IMPROVED NYSE RETAIL LIQUIDITY PROGRAM, designed to help mom & pop investors to keep from getting the shaft - they'll have a new name for their pilot program, FREAKING XPONENTIAL KNOCK YOUR SOCKS OFF HOLY COW BUY STOCKS NOW BEFORE THEY GO TO THE MOON PROGRAM.

Tue, 08/07/2012 - 22:31 | 2686544 Neethgie
Neethgie's picture

is that triple levered?

Tue, 08/07/2012 - 22:34 | 2686551 GMan_
GMan_'s picture

I think it will be a Credit Suisse product that's 5x leveraged.

Tue, 08/07/2012 - 22:35 | 2686553 Meesohaawnee
Meesohaawnee's picture

just tell us what the algos are programmed to be the high of the year GS.. analysis. Irrellevant

Tue, 08/07/2012 - 22:35 | 2686554 disabledvet
disabledvet's picture

this is the beauty of trading in the USA: "90% of the market is domestic.", sorry..."Europe" fast becoming this way as well. "economies so big they generate their own innovation and their own return." You are either in one or the other...but to me "not both." I simply don't understand the EZ AT ALL. With a fully united Germany however..."that's one BIG anchor tenant!" Of course you know what they say about the bird called a Cardinal don't you? "He attacks his reflection because he can't stand the idea of someone as beautiful as he being in the neighborhood."

Tue, 08/07/2012 - 22:35 | 2686555 zorba THE GREEK
zorba THE GREEK's picture

The next assault on the dollar by Bernanke will be so massive that the multi-nationals

will be dancing in the streets.

Tue, 08/07/2012 - 23:09 | 2686610 chump666
chump666's picture

then prepare for war.

Tue, 08/07/2012 - 22:42 | 2686567 chump666
chump666's picture

EUR going nowhere but down, as equities start to cap in the overbought ranges and begin to have a mini correction...or crash. It's all about this:

*Outflows spark bounce in onshore CNY fwds as corporates hoard USDs
*Offshore USD/CNH fwds also climb as RMB gain bets fade


Tue, 08/07/2012 - 22:42 | 2686568 l1b3rty
l1b3rty's picture

let's kick up the flouride at the GS headquarters

Tue, 08/07/2012 - 23:09 | 2686611 spinone
spinone's picture

As long as OPEC only takes dollars for oil, no worries.

Tue, 08/07/2012 - 23:14 | 2686616 SIOP
SIOP's picture

This article is so cute, Makes me all misty eyed remembering when earnings and PE ratios actaully had meaning.

Tue, 08/07/2012 - 23:17 | 2686619 HD
HD's picture

Misty water colored memories of the way we were....

Tue, 08/07/2012 - 23:23 | 2686630 GOLDTEETHSILVER...

*Play Misty For Me*

Tue, 08/07/2012 - 23:30 | 2686644 Oldballplayer
Oldballplayer's picture

With a nod to the dead guy sitting over in the corner.

Tue, 08/07/2012 - 23:59 | 2686701 Savyindallas
Savyindallas's picture

But wtih companies all cooking the books so much, why should earnings and PE ratios mean anything.

Tue, 08/07/2012 - 23:42 | 2686636 roadsnbridges
roadsnbridges's picture

Pifilil, the majesty of our King Obamaloney will make all FX worries disappear.  Moochelle is now working on I-pad recipes.  Fear not; prosperity is right around the corner - ahead of C. Hendricks tits.


(Probably get booted for this as well, even tho McBags first posted it.  Now there is a forward looking contibutor.)

Wed, 08/08/2012 - 00:24 | 2686730 WoodMizer
WoodMizer's picture

Merry Fucking Christmas 2012!

Wed, 08/08/2012 - 00:56 | 2686749 sitenine
sitenine's picture


YOY changes assuming current spot rates of 1.23 USD/EUR, 1.56 USD/GBP and JPY/USD 78.60 hold through the rest of the year

Good luck with that, right?

Stay tuned!  Things are quickly becoming harder and harder to hold together, aren't they?  Fans?  check.  Shit?  check.

The foreplay is just about over here folks, and it's been real fun.  LIEBOR will end up being a minor side note when this thing finally decides to blow its load.

Wed, 08/08/2012 - 00:53 | 2686768 HaroldWang
HaroldWang's picture

Yes, many companies did cite currency headwinds as an "excuse" for missing earnings/revenue. And guess what? They were forgiven by Mister Market. The same way they will be forgiven next Q when they pull out the same card with much less expected of them. Win, win for stocks. Lower the bar and beat, stock goes up. Meet or miss a bit, blame currency, stock goes up. 

Sorry but I really can't see a downside in this market. Economy, oh god yes, but market, keeps on truckin'

Wed, 08/08/2012 - 07:43 | 2687060 Central Bankster
Central Bankster's picture

Just the same way PCLN was forgiven for a small miss last night? No. current earnings expectations are reflected by high stock prices which do not match reality.

Wed, 08/08/2012 - 01:28 | 2686814 chump666
chump666's picture

correction is setting in.

could be really nasty, sharp and painful.

Wed, 08/08/2012 - 01:48 | 2686843 vertexa
vertexa's picture
Nearly 85% of the S&P 500 companies reported, just 51% have exceeded net profit expectations, and only 40% or so beat on revenue and more than 50% of the companies have lowered estimates for Q3

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