Apple set to be latest to suffer dollar impact

A surge in the US dollar has already wiped more than $20bn from first quarter sales at the largest US companies, a sum larger than revenues generated by Intel, Caterpillar or Goldman Sachs in the first three months of the year, according to an analysis by the Financial Times.

With the US earnings season approaching the halfway stage, that figure is likely to jump further. Apple, the world's most valuable company, reports results on Monday and warned in January that the currency move could slice more than $2bn from quarterly revenues.

So far during the current reporting period, General Motors, IBM, Procter & Gamble, Amazon and Johnson & Johnson have experienced $1bn-plus haircuts on sales as they translated revenues earned abroad back into US dollar terms.

Known as "top-line growth", revenues reflect how quickly a business is growing. In recent years, large multinational US company's sales have benefited from the combination of a weaker dollar and robust expansion across emerging market economies.

However, a sustained rise in the dollar since last summer and weakening global activity has weighed heavily on a host of blue-chip US companies.

While 71 per cent of S&P 500 companies have eclipsed first-quarter earnings expectations, 55 per cent of corporates have failed to beat revenue forecasts, according to S&P Capital IQ.

"Top-line growth is incredibly challenged. The dollar is even a bigger problem than people thought,'' said Dan Greenhaus, chief strategist at BTIG.

However, US equities indices have reclaimed record territory, with investors cheered by overall earnings topping lowered expectations of analysts. The S&P 500 closed last week at a new peak of 2,117.69, while the Nasdaq has surpassed the dotcom bubble high set in 2000.

"While earnings are not great, they're better than expected,'' said Mr Greenhaus.

The analysis of earnings statements, slide presentations, conference calls and executive commentary spanned more than 100 of the roughly 190 S&P 500 constituents that have reported first-quarter results.

The FT analysis showed a $20.1bn reduction in sales, which would have lifted the groups' reported revenues of $762bn by 2.6 per cent. When excluding financials, sales would have been more than 3 per cent higher. While the technology industry has been particularly exposed to the shift in the dollar - it generates more of its sales abroad than any other sector - a broad swath of companies have warned of the effects.

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McDonald's, Google, Facebook, Microsoft, Tyco, Coca-Cola, Kimberly-Clark, 3M, Caterpillar and PepsiCo were among the dozens that pointed to currency swings when delivering results.

"Currency has been powerful headwind for all multinational companies," said Dan Kelley, portfolio manager at Fidelity. "It is something companies are having to think differently about - what the implications are going forward and whether it makes sense to alter their cost structures."

Only half of the companies disclosed enough information to calculate the dollar's effect on sales - itself a somewhat nebulous figure as executives must consider changes to underlying operations, volume of goods sold and divestitures or acquisitions along with foreign exchange swings.

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