Strong U.S. dollar affects companies overseas sales
What's going on?
The strong U.S. dollar has negatively affected overseas sales of large U.S. companies. Many companies are feeling the effects of both the strong dollar making manufacturing costs higher and the slowdown in emerging market economies.
What does this mean?
Companies such as Pepsi blamed the strong U.S. dollar for stagnant operating profit abroad. Proctor and Gamble expects the strong dollar to make its sales fall 5-6% this year. Technology companies are also feeling the effect on their earnings, with Google saying their first quarter revenue would have been $795 million higher. In order to combat the foreign exchange issue, some companies plan to cut costs and source materials closer to the countries they operate in.
Why should I care?
Although the strength of the U.S. dollar is a good sign of the recovery of the U.S. economy, it is also having adverse effects on company’s overseas sales, as prices are higher. This may be a good time to sell any stocks in large blue chip companies that are experiencing lower than expected sales, or that have a large percentage of their sales and overall revenue coming from overseas.
Originally posted as part of the Finimize daily email.
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