U.S. corporations are warning that currency fluctuations are weighing on their results, raising a red flag for investors heading into the thick of the second-quarter earnings season. Roughly half of the first 23 S&P 500 firms that posted results for the latest quarter as of Friday said currency swings either had a negative impact on earnings or revenue or were expected to become a headwind in the coming months, according to FactSet.
That makes currency swings by far the most mentioned headwind on earnings calls so far. In comparison, seven firms mentioned the rising cost of raw materials, while five mentioned oil and gas prices and just one cited tariffs.
The strengthening dollar suggests that multinational firms could face an increasingly tough environment in the second half of the year. S&P 500 companies grew their earnings at the fastest pace since 2010 in the first quarter, boosted in part by a depreciating U.S. dollar. A weaker dollar benefits U.S. multinationals by making exports cheaper to foreign buyers, and also by making their overseas profits look bigger when translated back into the U.S. currency.
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