This week, foreign exchange (FX) data capture and analytics provider FiREapps released an analysis of the impact of FX exposure on earnings for large global businesses. The firm analyzed the earnings calls of 846 publicly traded Fortune 2000 companies; each included company makes at least 15 percent of its revenue outside its home country and does business in at least two currencies.
In the third quarter of 2013, 24.2 percent of the companies reported that currency volatility reduced their earnings per share (EPS). The total negative impact on earnings across the 78 companies that quantified it was $4.18 billion—much lower than in mid-2012, but 14 percent higher than in Q1/2013 (see Figure 1, below). In EPS terms, the average negative impact in Q3/2013 was $0.03 per share. The currencies that negatively impacted earnings in the most businesses were the Brazilian real, which was mentioned on 21 earnings calls, Japanese yen (19 calls), Australian dollar (13), euro (13), and Indian rupee (10).
Looking forward, FiREapps predicts that the FX change most likely to negatively affect multinationals in 2014 is appreciation of the dollar. "Whether it is Abenomics in Japan or the rollback of quantitative easing here at home, anything that results in dollar appreciation will impact the EPS of U.S. multinationals who are not prepared," says Wolfgang Koester, CEO of FiREapps. "Foreign exchange mismanagement is costly, but we are seeing a trend of corporations improving results by addressing historic processes and technologies that are no longer applicable given today's global economic environment."