S&P 500 Companies With More International Exposure Reporting An Earnings Decline of -21%

Given the weaker U.S. dollar in recent months, are S&P 500 companies with more international revenue exposure reporting higher (year-over-year) earnings and revenues for Q2 2023 compared to S&P 500 companies with more domestic revenue exposure?

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 decline for the S&P 500 for Q2 2023 is -7.3%. For companies that generate more than 50% of sales inside the U.S., the blended earnings growth rate is 0.4%. For companies that generate more than 50% of sales outside the U.S., the blended earnings decline is -20.8%.

The blended revenue growth rate for the S&P 500 for Q2 2023 is 0.1%. For companies that generate more than 50% of sales inside the U.S., the blended revenue growth rate is 2.2%. For companies that generate more than 50% of sales outside the U.S., the blended revenue decline is -5.8%.

What is driving the underperformance of S&P 500 companies with higher international revenue exposure?

At the sector level, the Health Care and Energy sectors are the top contributors to both the earnings and revenue declines for S&P 500 companies with more international revenue exposure.

At the company level for earnings, Chevron, Exxon Mobil, Merck, Moderna, and Pfizer are the largest contributors to the earnings decline for S&P 500 companies with more international revenue exposure. All five companies have reported or are expected to report year-over-year declines in EPS of more than 45%. If these five companies were excluded, the blended earnings decline for S&P 500 companies that generate more than 50% of revenues outside the U.S. would improve to -0.7% from -20.8%.

At the company level for revenues, four of these same five companies are also the largest contributors to the revenue decline for S&P 500 companies with more international revenue exposure: Chevron, Exxon Mobil, Moderna, and Pfizer. All four companies have reported or are expected to report year-over-year declines in revenues of more than 25%. If these four companies were excluded, S&P 500 companies with more international revenue exposure would be reporting growth in revenues of 1.0% rather than a decline in revenues of -5.8%.

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