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As the start of the Q1 earnings season approaches, there are concerns in the market about the impact of the stronger U.S. dollar and the impact of lower global economic growth on the sales and earnings of companies in the S&P 500. Are companies in the S&P 500 with more global exposure expected to report weaker sales and earnings growth relative to companies in the index with less global exposure?

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The answer is yes. FactSet Geographic Revenue Exposure data (based on the most recently reported fiscal year data for each company in the index) can be used to analyze global sales exposure for all the companies in the S&P 500. For this particular analysis, the index was divided into two groups: companies that generate more than 50% of sales inside the U.S. (less global exposure) and companies that generate less than 50% of sales inside the U.S. (more global exposure). Aggregate earnings and revenue growth rates were then calculated based on these two groups. The results are listed below.

The estimated earnings decline for the S&P 500 is -4.8%. For companies that generate more than 50% of sales inside the U.S., the estimated earnings growth rate is 0.0%. For companies that generate less than 50% of sales inside the U.S., the estimated earnings decline is -11.6%.

The estimated sales decline for the S&P 500 is -2.8%. For companies that generate more than 50% of sales inside the U.S., the estimated sales growth rate is 0.6%. For companies that generate less than 50% of sales inside the U.S., the estimated sales decline is -10.2%.

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For the first quarter, the Energy sector is expected to be the largest contributor to the projected year-over-year declines in both earnings and revenues, as the price of crude oil is nearly 50% below year-ago levels. If the Energy sector is excluded from the analysis, are companies in the S&P 500 (ex-Energy) with more global exposure expected to report weaker sales and earnings growth relative to companies (exEnergy) in the index with less global exposure?

The answer is still yes.

The estimated earnings growth rate for the S&P 500 (ex-Energy) is 3.1%. For companies (ex-Energy) that generate more than 50% of sales inside the U.S., the estimated earnings growth rate is 5.9%. For companies (ex-Energy) that generate less than 50% of sales inside the U.S., the estimated earnings decline is -1.3%.

The estimated sales growth rate for the S&P 500 (ex-Energy) is 3.2%. For companies (ex-Energy) that generate more than 50% of sales inside the U.S., the estimated sales growth rate is 4.1%. For companies (ex-Energy) that generate less than 50% of sales inside the U.S., the estimated sales growth rate is 0.9%.

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Thus, S&P 500 companies with higher global exposure are projected to reported lower earnings and lower revenue growth relative to S&P 500 companies with lower global exposure. When excluding the Energy sector from the analysis, the conclusions remain the same.

For more information on FactSet global exposure data, please see the following link: http://solutions.factset.com/learn_georev.

Read more about earnings trends in this edition of FactSet Earnings Insight. Visit www.factset.com/earningsinsight to launch the latest report.

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Senior Earnings Analyst
John’s weekly research report, Earnings Insight provides analysis and commentary on trends in corporate earnings data for the S&P 500, including revisions to estimates, year-over-year growth, performance relative to expectations, and valuations. He is a widely used source for the media and has appeared on CNBC, Fox Business News, and the Business News Network. In addition, he has been cited by numerous print and online publications such as The Wall Street Journal, Financial Times, The New York Times, MarketWatch, and Yahoo! Finance.

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