U.S. multinationals hit hard by strong dollar, to bleed further into 2015

Tue Jan 27, 2015 5:35pm EST
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By Chuck Mikolajczak and Sinead Carew

NEW YORK (Reuters) - A slew of U.S. multinational companies, from DuPont (DD.N: Quote) to Procter & Gamble (PG.N: Quote), showed that a strong U.S. dollar hurt their earnings, and several blue-chip exporters said the situation will get worse if the greenback holds its strength.

All told, the resurgent U.S. currency could shave up to $12 billion off U.S. companies' fourth-quarter 2014 revenue alone, according to currency expert Wolfgang Koester, chief executive of FireApps, a data analytics company in Phoenix, Arizona, that examines quarterly reports for currency-related losses.

The pain is hitting multiple sectors, including industrial companies such as 3M Co (MMM.N: Quote), technology companies like Microsoft Corp (MSFT.O: Quote) and Apple Inc (AAPL.O: Quote), airlines such as American Airlines Group Inc (AAL.O: Quote), healthcare companies, including Bristol-Myers Squibb Co (BMY.N: Quote) and Pfizer Inc (PFE.N: Quote), and consumer firms like Procter & Gamble - which all garner a large portion of their sales from outside the United States.

"This is a slow-motion crash," said Kim Forrest, senior equity research analyst at Fort Pitt Capital Group in Pittsburgh. It could take a couple of quarters for currency conversion losses to show up, she said.

After hitting a 6-1/2 month low in May, the dollar .DXY has surged nearly 20 percent against a basket of major currencies, making overseas sales denominated in other currencies less valuable in dollar terms.

The stronger dollar can also make U.S.-made products more expensive for consumers in other currencies and thus cut demand.

The Dow Jones industrial average .DJI, composed of large and well-known companies, was hit especially hard on Tuesday as six of seven companies in the index that reported results since Monday evening declined, with only United Technologies gaining.

"You have companies who don’t normally complain about (the dollar) who are starting to harp on it and it does make sense from an economic perspective that this would be a drag," said James Liu, global market strategist at JPMorgan Funds in Chicago. "It’s really the pace that matters - not just whether it is strengthening or weakening."   Continued...

American dollar notes are displayed in this photo illustration in Johannesburg August 13, 2014. REUTERS/Siphiwe Sibeko