Coming into the start of the Q1 earnings season, a number of companies with higher global revenue exposure were facing the potential headwind of the stronger U.S. dollar, but also the potential tailwind of higher global GDP growth. Now that more than 90% of S&P 500 companies have reported actuals results for the first quarter, did S&P 500 companies with higher global revenue exposure outperform or underperform S&P 500 companies with lower global revenue exposure in terms of earnings and sales growth for Q1'17?
FactSet GeoRev data (based on the most recently reported fiscal year data for each company in the index) can be used to answer this question. 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 blended (combines actual results for companies that have reported and estimated results for companies that have yet to report) earnings growth rate for the S&P 500 for Q1'17 is 13.6%. For companies that generate more than 50% of sales inside the U.S., the blended earnings growth rate is 9.9%. For companies that generate less than 50% of sales inside the U.S., the blended earnings growth rate is 20.9%.
The blended sales growth rate for the S&P 500 for Q1'17 is 7.8%. For companies that generate more than 50% of sales inside the U.S., the blended sales growth rate is 7.1%. For companies that generate less than 50% of sales inside the U.S., the blended sales growth rate is 9.4%.
What drove the outperformance of S&P 500 companies with higher global revenue exposure? At the sector level, the Information Technology and Energy sectors were the largest contributors to earnings and revenue growth in Q1'17 for S&P 500 companies that generate less than 50% of sales inside the U.S.