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 Q1 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 Q1 2023 is -2.2%. For companies that generate more than 50% of sales inside the U.S., the blended earnings growth rate is 2.7%. For companies that generate more than 50% of sales outside the U.S., the blended earnings decline is -10.2%.
The blended revenue growth rate for the S&P 500 for Q1 2023 is 3.9%. For companies that generate more than 50% of sales inside the U.S., the blended revenue growth rate is 6.1%. For companies that generate more than 50% of sales outside the U.S., the blended revenue decline is -2.1%.
What is driving the underperformance of S&P 500 companies with higher international revenue exposure?
In terms of earnings and revenues at the sector level, the Health Care and Information Technology sectors are the top contributors to the earnings and revenue declines for S&P 500 companies with more international revenue exposure. Within these two sectors, Intel, Moderna, and Pfizer are the largest contributors to the earnings and revenue declines for S&P 500 companies with more international revenue exposure. All three companies reported year-over-year decreases in earnings and revenues of more than 20% for Q1 2023. Both Intel and Moderna generate more than 70% of revenues outside the U.S., while Pfizer generates just under 60% of revenues outside the U.S. If these three 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 -5.6% from -10.2%, while the blended revenue decline for S&P 500 companies that generate more than 50% of revenues outside the U.S. would improve to -0.4% from -2.1%.
What is driving the outperformance of S&P 500 companies with higher domestic revenue exposure?
In terms of earnings, the Consumer Discretionary sector is the top contributor to earnings growth for S&P 500 companies with more domestic revenue exposure. Within this sector, Amazon.com is the largest contributor to earnings growth for S&P 500 companies with more domestic revenue exposure. The company reported EPS of $0.31 for Q1 2023 compared to EPS of -$0.38 for Q1 2022. Amazon.com generates nearly 70% of revenues inside the U.S. If this company were excluded, the blended earnings growth rate for S&P 500 companies that generate more than 50% of revenues inside the U.S. would fall to 0.2% from 2.7%. For more details on the impact of Amazon.com on earnings for the S&P 500 for Q1 2023 and CY 2023, please read our May 1 article, Amazon Is Largest Contributor To Expected Earnings Growth For The S&P 500 For 2023.
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