S&P 500 Companies With More Global Exposure Reporting Higher Earnings Growth in Q3

Given the uneven global economic recovery from COVID-19, are S&P 500 companies with more international revenue exposure underperforming S&P 500 companies with more domestic revenue exposure in terms of earnings and revenue growth for Q3 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 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 Q3 2021 is 32.7%. For companies that generate more than 50% of sales inside the U.S., the blended earnings growth rate is 26.3%. For companies that generate more than 50% of sales outside the U.S., the blended earnings growth rate is 44.3%.

The blended revenue growth rate for the S&P 500 for Q3 2021 is 15.3%. For companies that generate more than 50% of sales inside the U.S., the blended revenue growth rate is 12.4%. For companies that generate more than 50% of sales outside the U.S., the blended revenue growth rate is 23.8%.

What is driving the outperformance of S&P 500 companies with higher international revenue exposure? At the company level, Alphabet, Apple, Chevron, and Exxon Mobil are the largest contributors to earnings growth and revenue growth for S&P 500 companies with more international exposure. If these four 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 29.9% from 44.3%, 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 16.6% from 23.8%.

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