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More S&P 500 Companies See Negative Impact from FX than Tariffs in Q3


By John Butters  |  October 12, 2018

While the majority of S&P 500 companies will report earnings results for Q3 2018 over the next few weeks, about 5% of the companies in the index (24 companies) have already reported earnings. Given the expectations for double-digit earnings growth for Q3 (and for Q4), have these companies discussed specific factors that had a negative impact on earnings or revenues for 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 a number of factors (i.e. “currency,” “China,” etc.) in the conference call transcripts of the 24 S&P 500 companies that had conducted third-quarter earnings conference calls through October 11 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 12). The results are shown below

Negative Factors 

Foreign exchange has been cited by more than 60% of the companies that have reported to date (15) 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. The number of companies citing a negative impact from FX in Q3 is 25% higher than 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 the term “tariff” has been mentioned during the earnings calls of 12 S&P 500 companies to date, with six of these 12 companies citing a negative impact linked to tariffs. This number is up from just one company citing a negative impact from tariffs through the same point in time in Q2.

A list of the companies citing negative impacts from tariffs and from foreign exchange (and their specific comments) can be found in the full PDF version of this report.  

 negative earnings calls mentions

What Companies are Saying


“Regarding trade matters, current tariffs impact a small portion of our volume coming out of China. However, the uncertainty surrounding the issue is not helping and thus has a broader impact on the market.” -FedEx (Sep. 17)

“We continue to make benefits from sourcing merchandising, [and the] organization continues to do a good job of lowering acquisition cost. But I think that will probably be a little muted versus what it had been, particularly given some of the tariffs that might be coming on play. -AutoZone (Sep. 18)

“We expect adjusted gross margin in the range of 29.7% to 30%. As we've been discussing, this metric is affected by our continued shifts of tail A&P investments to retailer investment. It is also affected by our expected inflation rate of 3% to 3.2%. We are experiencing inflation in packaging, transportation and other commodities and some deflation in proteins and edible oils. Our estimate of packaging inflation includes some expected impact from tariffs.” -Conagra Brands (Sep. 27)

“How it impacts, I think everybody feels that tariffs, people smarter than me don't like them. And so it's probably a small net negative. Certainly, whatever negative it is, we can weather it better than others.” -Costco Wholesale (Oct. 4)

Foreign Exchange / Currency:

“Turning to currency. Exchange rates have moved from a 1% headwind to now being a 2% headwind to revenue, and a $0.01 to $0.02 headwind to earnings per share depending on rounding. Now, I'm not sure what it will be by the end of this quarter.” -Oracle (Sep. 17)

“In local currency, Mexico experienced a solid quarter while the exchange rate was a headwind to the reported U.S. dollar sales. The peso exchange rate was 7.3% higher than last year's Q4 ending rate.”  -AutoZone (Sep. 18)

“First quarter segment operating profit increased 12% in constant currency due to favorable sales mix and lower SG&A expenses, partially offset by raw material inflation and currency-driven inflation on products imported into the UK.”        -General Mills (Sep. 18)

“Now, I'd like to turn to guidance. Our outlook assumes current business conditions and foreign exchange rates, which have generally continued to weaken against the dollar year-over-year. I will begin with our full year guidance, which assumes an incremental FX headwind to revenue of $15 million, as compared to our prior guidance.” -Red Hat (Sep. 19) 

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John Butters

Vice President, Senior Earnings Analyst

Mr. John Butters is Vice President and Senior Earnings Analyst at FactSet. His 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, The Financial Times, The New York Times, MarketWatch, and Yahoo! Finance. Mr. Butters has over 15 years of experience in the financial services industry. Prior to FactSet in January 2011, he worked for more than 10 years at Thomson Reuters (Thomson Financial), most recently as Director of U.S. Earnings Research (2007-2010).


The information contained in this article is not investment advice. FactSet does not endorse or recommend any investments and assumes no liability for any consequence relating directly or indirectly to any action or inaction taken based on the information contained in this article.