U.S. International Profits Are Booming: Fantastic! (AAPL, GOOGL)

Frank
July 18, 2017
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While President Donald Trump has touted his America First policy as the road to America’s turnaround, American companies may have a different story to tell, according to The Wall Street Journal. U.S. corporations with significant exposure to overseas markets are thriving amid a world of open borders and free trade. (For more, see also: Trump Bump: Q4 Earnings Numbers Remain Strong.)

Robust Growth

During the first quarter, American companies with greater exposure to foreign markets were expected to report earnings growth of 14.9%, more than twice the 6.8% increase expected of more domestically focused firms, according to figures provided by RBC Capital Markets and reported on by the Journal. As a result, companies that do significant business in foreign markets—for example Apple Inc. (AAPL), Google parent Alphabet Inc. (GOOGL) and Caterpillar Inc. (CAT)—could enjoy notable growth in share prices.

Alphabet Inc., for example, recently reported quarterly earnings per share that were 29% higher at $7.73, as the company benefited from a sharp increase in advertising on YouTube and also on mobile platforms, according to Reuters. McDonald’s Corp (MCD) also reported strong financial performance, revealing that its earnings per diluted share rose 18% to $1.47 in the first quarter.

Kajal Lahiri, a distinguished Professor at University at Albany, State University of New York, commented on this situation during an interview with Investopedia. “Companies that do relatively more business overseas have fared better in their earnings last quarter than companies that are more domestic.” He noted that several companies—including Apple and Caterpillar—have reported double-digit earnings growth so far. “This is because the economic activity in the U.S. has slowed down but has accelerated overseas,” Lahiri told Investopedia.

A Potential Tailwind

Stephan Unger, an assistant professor at Saint Anselm College, spoke to the U.S. dollar’s potential near-term headwinds that could prove beneficial to American companies that do significant business overseas. (For more, see also: Interesting Facts About Imports and Exports.)

“Due to the delay in an interest rate increase by the Fed, the U.S. dollar is likely to weaken within the next couple of months, which will support export oriented companies in increasing their revenues,” he said during an interview with Investopedia. “One has to keep an eye on the Fed’s June meeting.”

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