S&P 500 Companies with More Global Exposure Expected to See Higher Earnings Growth in Q2

Given the uneven global economic recovery from the impact of COVID-19, are S&P 500 companies with more international revenue exposure expected to underperform S&P 500 companies with more domestic revenue exposure in terms of earnings and revenue growth for Q2 2021?

The answer is no. FactSet Geographic Revenue Exposure data (based on the most recently reported fiscal year data for each company in the index) was used to answer this question. For this analysis, the index was divided into two groups: companies that generate more than 50% of sales inside the U.S. (more domestic exposure) and companies that generate more than 50% of sales outside the U.S. (more international exposure). Aggregate 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 Q2 2021 is 69.3%. For companies that generate more than 50% of sales inside the U.S., the blended earnings growth rate is 62.0%. For companies that generate more than 50% of sales outside the U.S., the blended earnings growth rate is 87.0%.

The blended revenue growth rate for the S&P 500 for Q2 2021 is 20.2%. For companies that generate more than 50% of sales inside the U.S., the blended revenue growth rate is 17.0%. For companies that generate more than 50% of sales outside the U.S., the blended revenue growth rate is 30.5%.

What is driving the outperformance of S&P 500 companies with higher international revenue exposure? At the sector level, the Energy sector is expected to be the largest contributor to the higher earnings and revenue growth rates for S&P 500 companies with more international exposure in Q2. Within the Energy sector, Exxon Mobil and Chevron are the largest contributors to earnings and revenue growth for S&P 500 companies with more international exposure. Exxon Mobil generates 65% of revenues outside the U.S., while Chevron generates 61% of revenues outside the U.S. If these two companies were excluded, the blended earnings growth rate for S&P 500 companies that generate more than 50% of revenues outside the U.S. would fall to 63.9% from 87.0%, while the blended revenue growth rate for S&P 500 companies that generate more than 50% of revenues outside the U.S. would fall to 24.5% from 30.5%.

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