Prepare for the strong U.S. dollar hit on big tech, S&P 500 earnings

The strong U.S. dollar will take a toll on big tech ad S&P 500 earnings is this quarter. Tech companies generate the biggest percentage of sales outside the U.S. and companies from Apple to Meta, Alphabet, Netflix, and Tesla are worth watching for dollar impact.

Tim Mullaney for CNBC:

When athletic apparel giant Nike disclosed on June 27 that a strong U.S. dollar weighed on sales in its most recent quarter and the rising value of the greenback would keep pressuring sales in fiscal 2023, its shares sold off, and gave an early warning to a market already worried about the earnings outlook for the June quarter. That followed a warning from Microsoft that June-quarter sales would be $460 million lower for the same reason, shaving $250 million from profit.
Indeed, the dollar’s 11% gain this year against a basket of currencies – and 12% against the euro – is a looming problem as earnings season kicks into gear. Standard & Poor’s 500 companies get 29% of their sales from outside the U.S, according to Goldman Sachs. They typically sell those products or services in local currencies, then report financial results including those sales in dollars. So if Nike sells a pair of shoes for 100 euro, it was worth about $7 less at the end of its quarter than at the beginning.
The numbers aren’t massive in percentage terms – Microsoft’s miss works out to between 1% and 2% of earnings. But in a nervous market where companies’ stocks get punished for even small earnings misses, they are worth being prepared for, experts say…
Companies with high exposure to foreign sales include Qualcomm (96%), oilfield services company Schlumberger (85%), disability insurer Aflac (70%), Netflix and Meta (59%), and Alphabet at 54%… A couple of companies worth watching as this issue develops are Tesla, which gets a quarter of its sales in developing nations like China, and Apple, which gets 19% of sales in Greater China (including Hong Kong and Taiwan) and another 24% in Europe.

MacDailyNews Take: Apple will likely have to adjust prices upward internationally (as they’ve already begun), given the strong, and strengthening, currency headwinds, especially for the crucial Christmas quarter.
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