“La sabiduría de la vida consiste en la eliminación de lo no esencial. En reducir los problemas de la filosofía a unos pocos solamente: el goce del hogar, de la vida, de la naturaleza, de la cultura”.
Lin Yutang
27 de enero de 2015
Stronger Dollar Punishes U.S. Earnings From P&G to DuPont
The dollar’s surge is reducing earnings at American companies from Procter & Gamble Co. (PG) to Pfizer Inc. (PFE) and DuPont Co. that make a large portion of their revenue abroad.
P&G, the world’s biggest consumer-products maker, today reported profit that missed
analysts’ estimates in the quarter ended Dec. 31 after what Chief
Executive Officer A.G. Lafley called “unprecedented” foreign-exchange
rate fluctuations reduced sales by 5 percentage points. DuPont and
drugmakers Pfizer and Bristol-Myers Squibb Co. (BMY) all posted annual forecasts that trailed predictions, in part because of the dollar.
While
75 percent of Standard & Poor’s 500 Index companies have beaten
analysts’ estimates so far this earnings season as the U.S. economy
weathers a slowdown in global growth, the dollar’s advance is making
American goods and services more expensive overseas, eroding sales. The
greenback’s strength has taken some companies by surprise, prompting United Technologies Corp. (UTX) to cut an annual outlook that was just a month old.
“There
wasn’t much choice here but to take the full year down,” United
Technologies CEO Gregory Hayes said yesterday in an interview. His
company, the maker of Pratt & Whitney jet engines, Sikorsky
helicopters and Otis elevators, is now modeling for a euro at $1.10,
after projecting the currency at $1.25 in issuing full-year earnings
expectations last month.
Money has flooded into dollar assets in
recent months as the world’s largest economy outperforms its developed
peers and the Fed prepares to raise its main interest rate from the zero-to-0.25 percent range it’s been in since 2008.
The
U.S. Dollar Index rose to the highest since September 2003 yesterday,
adding to this year’s 4 percent gain. The measure, which
Intercontinental Exchange Inc. uses to track the greenback against the
currencies of six trade partners, surged 5 percent last quarter.
Impact on Tech
Earnings
later today from Apple Inc. and Yahoo! Inc. will give investors a
better sense of the impact on technology companies, which get a big
chunk of revenue from abroad. Microsoft Corp. (MSFT)’s
results last night showed that a year-old turnaround by CEO Satya
Nadella is being tripped up in overseas markets by the stronger dollar,
which, combined with a slump in China and Japan, curbed sales of business-software licenses.
“The
one sector that is arguably the most exposed to the rising dollar is
technology as the sector is by far the best represented among the group
of shares with the least North American sales exposure,” Simon Colvin,
an analyst at Markit, said in a report.
Photographer: Francis Specker/Bloomberg
Procter & Gamble Co. Chief Executive Officer A.G. Lafley has divested P&G’s... Read More
In many cases, like Microsoft’s, the strength of the dollar
is only adding to challenges faced by the companies. Pfizer, the biggest
U.S. drugmaker, is trying to replace revenue after losing exclusive
sales rights to blockbuster medicines including Celebrex and Lipitor.
Hedging Currencies
Other
companies, like Honeywell International Inc., were able to anticipate
the currency changes. Back in October, Honeywell CEO Dave Cote reversed
his policy and started using currency hedges because he was -- rightly
-- concerned the euro may sink further. 3M Co. (MMM) today was another example of a global business weathering the dollar strength, partially with currency hedges. The St. Paul, Minnesota-based manufacturer beat
fourth-quarter earnings estimates, countering the negative effects of
foreign-exchange rates with stronger sales, especially in fast-growing
markets.
P&G, which makes about two-thirds of annual sales
outside of the U.S., said currency effects will continue to be a drag in
the current fiscal year and reduce sales by 5 percent, leading to a
decline of as much as 4 percent from a year earlier. Like Kimberly-Clark
Corp. and other consumer companies, Cincinnati-based P&G was
especially hurt by a slump in Venezuela, where falling oil prices have heightened the bolivar’s volatility.
Bristol-Myers,
the New York-based maker of cancer treatments such as Yervoy for
melanoma, gets about half its sales outside the U.S. The dollar’s
strength weighs down the company as it pursues growth by focusing on a
new class of cancer drugs. Caterpillar Inc. (CAT)
also disappointed investors today with 2015 sales and earnings
forecasts that trailed analysts’ estimates. The world’s largest mining
equipment maker was hurt by falling oil and copper prices that threaten
to lower demand from drillers and miners.
The weaker euro and
Japanese yen led to a drop in sales last quarter, Caterpillar also said.
However, the strength of the dollar, while negative for sales, helps
cut costs and overall is expected to be positive to profit, Caterpillar
said.
So far 118 of S&P 500 members have posted results.
Among other companies reporting after the market closes are AT&T
Inc. and Amgen Inc. Tomorrow, 31 S&P 500 companies are scheduled to
post earnings, including Boeing Co., General Dynamics Corp. and Facebook
Inc.
To contact the reporter on this story: Cecile Daurat in Wilmington at cdaurat@bloomberg.net
To contact the editors responsible for this story: Tom Giles at tgiles5@bloomberg.net Cecile Daur, John Lear
