U.S. Dollar Strength a Concern for S&P 500 Companies in Q1’17

While the majority of S&P 500 companies will report earnings results for Q1 2017 over the next few weeks, 5% of the companies in the index (23 companies) have already reported earnings results for the first quarter. Given the number of concerns in the market, have these companies discussed specific factors that had a negative impact on earnings or revenues for the first quarter during their earnings conference calls?

To answer this question, FactSet searched for specific terms related to a number of factors (i.e. “currency,” “China,” etc.) in the conference call transcripts of the 23 S&P 500 companies that have conducted first quarter earnings conference calls through April 6 to see how many companies discussed these factors. FactSet then looked to see if the company cited a negative impact, expressed a negative sentiment (i.e. “volatility,” “uncertainty,” “pressure,” “headwind,” etc.), or discussed clear underperformance in relation to the factor for either the quarter just reported or in guidance for future quarters. 

Currency Concerns

Similar to previous quarters, the stronger U.S. dollar has been cited by the most companies (11) in the index to date, as a factor that either had a negative impact on earnings or revenues in Q1, or is expected to have a negative impact on earnings and revenues in future quarters. Most companies did not cite a specific currency when discussing the negative impact of the stronger dollar. For the companies that did mention a specific currency, the peso was cited by the highest number of companies (three).

“The peso devalued over the course of the quarter and this has created a headwind and our EPS was negatively impacted by $0.18 a share.” –AutoZone (February 28)

“Adjusted gross margin was 31.6% in the third quarter, an increase of 180 basis points compared to a year ago…These gross margin gains were partially offset by unfavorable sales mix and unfavorable FX due to the weakening of the Mexican peso.” –ConAgra (March 23)

“Definitely, it's FX-related, Rob, the peso which is very volatile as you know, has gone against us, actually the last two years.” –McCormick & Company (March 28)