After having a muted impact on corporate earnings in the second quarter of 2014, currency volatility came back with a bang in the third quarter. That's the headline news from FiREapps' latest "Currency Impact Report." The study analyzed the third-quarter earnings calls of 1,200 publicly traded, multinational companies from North America and Europe, tracking the proportion of these calls on which executives mentioned a currency-related impact on earnings.
The result: Nearly a quarter of all companies (23 percent) mentioned a negative currency impact, for a total reported dollar value of US$8.0 billion in Q3/2014. (See Figure 1 on page 2 of this article.) The average per-company reported negative impact was a 3 cent reduction in earnings per share (EPS). "I think one of the things that is really interesting this time around for North America is the frequency of currency mentions by CEOs," says Wolfgang Koester, CEO of FiREapps. "They wouldn't talk about it if it didn't have a material impact."
For European businesses, the average impact equaled 0.25 percent of annual revenue, whereas for North American businesses that figure was 0.21 percent. For companies in both geographies, the euro-dollar was the currency pair most commonly mentioned as having an effect; it was cited as impactful by 72 North American businesses and 22 Europeans. The next most impactful currencies were the Japanese yen (cited by 34 North American and 11 European firms) and the Russian ruble (15 European and 12 North American firms).
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