Strong U.S. Dollar Top Excuse For Q2 Earnings Misses

Written by John Butters, FactSet

While the majority of S&P 500 companies will report earnings results for Q2 2017 over the next few weeks, 5% of the companies in the index (23 companies) have already reported earnings results for the second quarter. Given the number of concerns in the market, have these companies discussed specific factors that had a negative impact on earnings or revenues for the second quarter during their earnings conference calls?

To answer this question, FactSet searched for specific terms related to a number of factors (i.e. “currency,” “China,” etc.) in the conference call transcripts of the 23 S&P 500 companies that have conducted second quarter earnings conference calls through July 7 to see how many companies discussed these factors. FactSet then looked to see if the company cited a negative impact, expressed a negative sentiment (i.e. “volatility,” “uncertainty,” “pressure,” “headwind,” etc.), or discussed clear underperformance in relation to the factor for either the quarter just reported or in guidance for future quarters. The results are shown below.

Similar to previous quarters, the strong U.S. dollar has been cited by the most companies (14) in the index to date as a factor that either had a negative impact on earnings or revenues in Q2, or is expected to have a negative impact on earnings and revenues in future quarters. Most companies did not cite a specific currency when discussing the negative impact of the strong U.S. dollar. For the companies that did mention a specific currency, the highest number of companies cited the peso (four) and the pound (three). Comments from these seven companies are published on the next page.

It is interesting to note that while only three S&P 500 companies discussed a specific negative impact from “wages,” five other S&P 500 companies discussed the subject during their earnings calls.However, since these five companies did not highlight a specific negative impact from wages, they were not included in the chart below.Comments from all eight of these companies are published on the next two pages.