FactSet Research : S&P 500 Companies With More Global Exposure Reporting Lower Earnings and Sales in Q4

S&P 500 Companies With More Global Exposure Reporting Lower Earnings and Sales in Q4 Earnings

By John Butters| January 30, 2023

Given the easing of COVID restrictions in China and the weaker U.S. dollar in recent months, are S&P 500 companies with more international revenue exposure reporting stronger earnings and revenues for Q4 2022 compared to S&P 500 companies with more domestic revenue exposure?

The answer is no. FactSet Geographic Revenue Exposure data (based on the most recently reported fiscal year data for each company in the index) was used to answer this question. For this analysis, the index was divided into two groups: companies that generate more than 50% of sales inside the U.S. (more domestic exposure) and companies that generate more than 50% of sales outside the U.S. (more international exposure). Aggregate earnings and revenue growth rates were then calculated based on these two groups.

Earnings decline

• The blended earnings decline for the S&P 500 for Q4 2022 is -5.0%. This combines actual results for companies that have reported and estimated results for companies that have yet to report.

• Domestic blended earnings decline is -3.5%.

• International blended earnings decline is -7.3%.

Revenue growth rate

• The blended revenue growth rate for the S&P 500 for Q4 2022 is 3.9%.

• Domestic blended revenue growth rate is 4.5%.

• International blended revenue growth rate is 2.4%.

What is driving the underperformance of S&P 500 companies with higher international revenue exposure?

In terms of earnings at the sector level, the Information Technology and Communication Services sectors are the top contributors to the larger earnings decline for S&P 500 companies with more international revenue exposure. These two sectors rank first and fourth in the S&P 500 in terms of the highest percentages of revenue generated outside the U.S. at 58% and 42%, respectively.

Within these two sectors, Intel, Alphabet, Meta Platforms, and Apple are four of the largest contributors to the larger earnings decline for S&P 500 companies with more international revenue exposure. If these four companies were excluded, S&P 500 companies that generate more than 50% of revenues outside the U.S. would have a blended earnings growth rate of 1.1% for Q4 rather than an earnings decline of -7.3%.

In terms of revenues at the sector level, the Information Technology and Materials sectors are the largest contributors to the smaller revenue growth rate for S&P 500 companies with more international revenue exposure. These two sectors rank first and second in the S&P 500 in terms of the highest percentages of revenue generated outside the U.S. at 58% and 55%, respectively.

Within these two sectors, Intel, Apple, HP, Dow, and LyondellBasell industries are five of the largest contributors to the smaller revenue growth rate for S&P 500 companies with more international revenue exposure. If these five companies were excluded, the blended revenue growth rate for S&P 500 companies that generate more than 50% of revenues outside the U.S. would improve to 4.4% from 2.4%.

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