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With about a month to go before the start of the Q2 earnings season, there are concerns in the market about the impact of a rising U.S. dollar and slower global economic growth on companies in the S&P 500 with higher international revenue exposure. Based on current estimates, are S&P 500 companies with higher global revenue exposure expected to underperform S&P 500 companies with lower global revenue exposure in terms of earnings and sales growth for Q2 2018?

The answer is no. FactSet Geographic Revenue Exposure data (based on the most recently reported fiscal year data for each company in the index) can be used to answer this question. For this particular analysis, the index was divided into two groups: companies that generate more than 50% of sales inside the U.S. (less global exposure) and companies that generate less than 50% of sales inside the U.S. (more global exposure). Aggregate earnings and revenue growth rates were then calculated based on these two groups.

S&P 500 Earnings and Revenue Growth Q2

The estimated earnings growth rate for the S&P 500 for Q2 2018 is 19.0%. For companies that generate more than 50% of sales inside the U.S., the earnings growth rate is 16.5%. For companies that generate less than 50% of sales inside the U.S., the earnings growth rate is 23.9%.

The estimated sales growth rate for the S&P 500 for Q1 2018 is 8.7%. For companies that generate more than 50% of sales inside the U.S., the sales growth rate is 7.4%. For companies that generate less than 50% of sales inside the U.S., the sales growth rate is 12.5%.

S&P 500 Aggregate Sector Geographic Revenue Exposure

Sector-Level Analysis

What is driving the expected outperformance of S&P 500 companies with higher global revenue exposure? At the sector level, the Information Technology, Energy, and Materials sectors are projected to be the largest contributors to earnings and revenue growth in Q2 for S&P 500 companies with more global exposure. Overall, these three sectors are expected to report the highest earnings and revenue growth rates of all 11 sectors in Q2. These three sectors also rank first (Information Technology), second (Materials), and fourth (Energy) for highest international revenue exposures of all 11 sectors in the index.

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Senior Earnings Analyst
John’s 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, Financial Times, The New York Times, MarketWatch, and Yahoo! Finance.

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