More Companies Citing Negative Impact from FX than Tariffs on Q3 Earnings Calls to Date

While most S&P 500 companies will report earnings results for Q3 2019 over the next few weeks, about 4% of the companies in the index (22 companies) had reported earnings results for the third quarter through yesterday. Given the current expectations for a year-over-year decline in earnings for Q3, have these companies discussed specific factors that had a negative impact on earnings or revenues in the third quarter (or are expected to have a negative impact in future quarters) during their earnings conference calls?

To answer this question, FactSet searched for specific terms related to several factors (i.e. “currency,” “China,” etc.) in the conference call transcripts of the 22 S&P 500 companies that had conducted third quarter earnings conference calls through yesterday (October 10) 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. FactSet also compared the number of companies citing these factors in the third quarter to the number of companies that cited these same factors in the second quarter through approximately the same point in time (through July 11). The results are shown below.

Foreign exchange has again been cited on the most earnings calls to date (11) as a factor that either had a negative impact on earnings or revenues in Q3 or is expected to have a negative impact on earnings and revenues in future quarters. Half (11 of 22) of the S&P 500 companies that have conducted earnings conference calls to date for the third quarter have cited some negative impact from foreign exchange rates. However, few of these companies discussed specific currencies that had weakened or were expected to weaken against the U.S. dollar. The number of companies citing a negative impact from FX in Q3 (11) is about equal to the number of companies that cited a negative impact from this factor in Q2 (12) at about the same point in time.

It is interesting to note that while ten companies discussed tariffs or trade (in relation to international trade), only five companies cited a negative impact.

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