Currency fluctuations eating into U.S. MNC’s earnings, FIREapps

FIREapps, a risk consultancy firm, has filed a report on the impact that currency fluctuations have had on U.S. MNCs

In a report prepared by FIREapps, fluctuations in exchange rates during the last quarter of 2015 had the biggest negative impact on the financial results of American companies in the last five years. Global currencies significantly weakened against the dollar.

As per the data compiled by the currency risk consulting firm, companies which quantified an exchange rate effect have as a group reported a loss of $33.94 billion, a 76% higher loss than that reported in the third quarter of 2015.

This is because earnings of U.S. multinationals are worth less when the greenback is strong, since its robustness makes U.S. goods and services more expensive overseas.

More than 357 U.S. companies have reported a negative impact due to currency fluctuations in the fourth quarter of 2015, the largest since FIREapps started analyzing the data in 2011.

Of the 357 companies, 47 have reported that currency fluctuations had had an impact of their earnings per share (EPS), with an average negative effect of 7 cents a share, which is however lower than the 12 cents a share average for the third quarter.

FIREapps report includes a review of 850 MNCs in Canada, Mexico and in the United States who have at least 15% revenues from two currencies.

In most reports filed by companies during their fourth quarter earnings calls, the euro found 79 mentions while the Canadian dollar was mentioned 37 times.

As per data available from S&P Dow Jones Indices, U.S. S&P 500 companies derive nearly 50% of their revenues from sales in overseas markets, with Europe accounting to less than 10% of their sales.

During the fourth quarter of 2015, the USD was up by 3.9% against the Canadian dollar and during the same period it was up by 2.8% against the Euro.


Categories: Economy & Finance, Strategy


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