Over the past few weeks, the United States has escalated military actions in the Middle East to combat ISIS and other terrorist groups. During this same time frame, the value of the S&P 500 has declined by 2.1% (to 1965.99 yesterday from 2007.71 on September 5). With the peak weeks of the Q3 2014 earnings season on the horizon, will the military conflict in the Middle East have a direct impact on the expected revenue and earnings of companies in the S&P 500 for the third quarter? How much revenue exposure do S&P 500 companies have in the Middle East?
The answer to the second question is very little impact. Based on the most recent FactSet Geographic Revenue exposure data (which provides a structuralized and normalized presentation of corporate revenue by geography), companies in the S&P 500 in aggregate generate only about 1.9% of their revenues from the Middle East region. Of the 8 classified regions, the Middle East region ranks as the 6th highest for revenue exposure for the S&P 500, above only the Oceania region (Australia, New Zealand, and the Pacific Islands) at 1.5% and Africa at 0.8%.
At the sector level within the S&P 500, the three sectors that generate the highest percentage of revenue in aggregate from the Middle East region are the Industrials (3.7%), Information Technology (3.5%), and Energy (3.2%) sectors. At the industry level, the three industries that generate the highest percentage of revenue in aggregate from the Middle East region are the Tobacco (6.5%), Construction & Engineering (6.3%), and Industrial Conglomerates (6.0%) industries. Thus, revenue exposure to the Middle East region is limited for the S&P 500 even at the sector and industry levels.
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