U.S. dollar strength has helped drive down commodity prices, given consumers more purchasing power and generally helped firms that do most of their business within the country.
However, the strengthening greenback is taking its toll elsewhere, according to an analysis this week from Goldman Sachs.
"Companies most exposed to international sales faced negative currency impacts on revenue and (earnings per share)," Goldman said in a report that looked at the impact multiple variables are having on corporate health this year. "Even with hedges in place, managements predict this trend will continue in 2015. Companies that also incur significant costs in non-U.S. locations witnessed an offset to lower revenue on the bottom line."
Broadly, conference calls during fourth-quarter earnings season showed CEOs optimistic due to lower oil prices, related consumer strength and accelerated growth in the housing market.
Posing the biggest threat to that scenario, however, was expected continued currency strength as the U.S. economy grows faster than its global counterparts and the Federal Reserve prepares to tighten monetary policy through increasing interest rates.
The , which measures the greenback against a basket of global competitors, has risen 15.2 percent over the past six months. The dollar is up 14.3 percent against the euro and 15.9 percent against the yen during the same period.
Goldman's analysis focused on seven firms and their own assessment of currency impacts:
Procter & Gamble: Across all currencies, foreign exchange hurts totaled $450 million after tax in the December quarter, $650 million fiscal year to date and are forecast to be a $1.4 billion after tax profit hurt over the course of the fiscal year. This is the most significant fiscal-year currency impact we have ever incurred. (emphasis added in all cases)
Johnson & Johnson: …if currency exchange rates were to remain where they were as of last week for the balance of the year then our sales growth rate would decrease by nearly 5.5 percent, reflecting the recent weakening of the euro and other major currencies against the U.S. dollar.
United Technologies: The incremental negative sales impact from translation effects is expected to be around $1.5 billion.
IBM: Currency impacted our revenue performance by about 4.5 points or $1.2 billion. This is a 1.5-point growth or $400 million more than anticipated based on spot rates 90 days ago.
DuPont: If you look at the total impact on the revenue line for 2015, we're looking at now about 3.5 percent. And then when you translate that down our positions and in all of our businesses, it does come out to $0.60 a share. So it is large.
McDonald's: ...we expect a negative translation on first-quarter 2015 of $0.08 to $0.10 per share, and a full-year impact of $0.35 to $0.40 per share.