Companies report strong dollar impact on Q3 earnings

While the strong dollar might have been good for your international summer fun, it’s not quite good news for corporate earnings, now that the chilly October winds have arrived. After a few weeks of CFO financial assessments, analyst questions, and expectation-exceeding results, we rounded up some of the firms that said their bottom lines have been (or will be) impacted by FX fluctuations during Q3 earnings.

The formula for calculation? It’s all about exposure—“S&P 500 companies with higher international revenue exposure are expected to report lower earnings growth relative to S&P 500 companies with higher domestic revenue exposure for Q3.” John Butters, vice president and senior earnings analyst at FactSet, told CFO Brew over email.

• Johnson & Johnson: The New Jersey pharmaceutical company known for its one-dose-and-you’re-done Covid-19 vaccine, anticipated an “unfavorable currency impact on 2023's adjusted earnings per share of approximately $0.40 to $0.45 or $0.10 more than the $0.30 to $0.35 impact [it] referenced in July’s call” on last week’s earnings call.
• P&G: CFO Andre Schulten told analysts on the company’s recent earnings call that it expects volatility in the coming fiscal year. Tide detergent and Gillette razors, two of P&G’s core products, are both set to experience sales declines—the first in five years. And, while CFO Brew is aware of the underwear index as a possible recessionary indicator, we won’t judge our readers who get on calls with us unshaven and/or with smelly clothes.
• Costco: The bulk food distributor, which has reassured our weary society (again) that it will not raise its hot dog prices, said that foreign currencies relative to the US dollar negatively impacted sales by a little over 2%.
• Intuitive Surgical: Some companies haven’t adjusted their numbers from FX fluctuations but warned analysts of their concerns. Intuitive Surgical, a clinical trial company, cautioned listeners saying, “While we have not experienced a significant impact so far, the strengthening of the US dollar reduces distributor margins and may cause delays in capital purchases.”
• Delta Air Lines: On the flip side, Delta told investors it sees holiday travel numbers returning to 2019 levels, saying that “while European currencies are down versus the dollar, foreign yields are more than offsetting the foreign exchange impact, and US demand is driving higher US point of sale than 2019.”
• BlackRock: “In total, these market declines, along with significant dollar appreciation against major currencies, reduced the value of BlackRock’s assets under management by over $2 trillion since December 31,” the bank reported.
• Carnival: The American cruise liner said that “revenue per passenger day for the third quarter 2022 decreased from a strong 2019,” due to the impact of future cruise credits and currency impact, as the firm has a large presence in Europe and the UK.
• Nike: The athletic brand doesn’t see the headwinds easing up anytime soon, telling analysts that it estimates “the full year negative impact of foreign exchange on reported revenue and EBIT to be approximately $4 billion and $900 million, respectively.” The Oregon-based brand, which was impacted by its international supply-chain exposure during the pandemic, said, “We continue to expect currency-neutral revenue growth of low double digits.”
• Netflix: While the streaming company more than doubled forecasts of new subscribers in the last quarter, the company noted in its letter to shareholders that “the 4 percentage point year-over-year decline in operating margin is almost entirely due to the appreciation in the US dollar vs. most other currencies during this period. EPS of $3.10 vs. $3.19 a year ago included a $348 million non-cash unrealized gain from FX remeasurement on our euro-denominated debt.”
• Hasbro: The toy maker reported that “foreign exchange had a negative $53.7 million impact, or 3%, on third-quarter 2022 revenue,” with each segment of the company seeing revenue declines because of foreign-exchange impact.—DA, KT