The strong dollar may have dented foreign profits for multinationals and cut profits from the S&P 500 by a few percent. Several well-known companies have reported results that are being hit by the downturn. dollar appreciation. Microsoft warned in an announcement in early June that its fiscal fourth-quarter revenue and earnings would be affected by foreign exchange. The software giant will report those earnings on July 26. This week, both IBM and Johnson and Johnson said the strong dollar has hit their bottom line. IBM earnings beat expectations this week, but it lowered its free cash flow guidance from $10 billion for all of 2022, partly due to the greenback. Johnson and Johnson cut their full-year outlooks based on the currency’s impact. Analysts say the companies most likely to suffer from this year’s 12% rise in the dollar so far are multinationals, mostly tech companies. , but also consumer goods and pharmaceuticals. “We were told that the median for earnings is 20 to 30 basis points for earnings per,” said Julian Emanuel, head of equities, derivatives and quantitative research at Evercore ISI. 1% moves in dollars. He added that 30% of S&P earnings come from foreign sources. Emanuel recently cut his 2022 estimate for S&P 500 earnings per share to $221.50, from $226. “Combined with a [dollar]Labor market tensions, supply chain and inventory issues in a de-globalized world, margins and EPS are under pressure as potential recession scenarios develop, he noted. development,” he noted. said a rough calculation of the impact on second-quarter results would put profits in the range of 3% to 5%, based on a 14% year-over-year increase in the dollar. This trend will also continue into the next quarter, he added. “The dollar is a headwind. I don’t think it’s within the estimate,” Rauscher said. When it’s in the estimate, we’ll reflect it and then it might not be a problem. “S&P 500 profits are expected to grow 5.9%, based on estimates and actual reports, according to I/B/E/S data from Refinitiv. Of the 60 companies reported as of this year Wednesday morning, 78.3% beat estimates. Rauscher said so far, only a handful of companies have announced or before – announced because of the currency. increased 16% over the same period last year. That’s no small thing, Mr. Rauscher said. This will affect next quarter’s earnings, he said. No. “” The estimate is too high. They need to be reflected lower and based on my research I don’t think it’s priced in yet. Once this correction is on its way, he said, which will take some time and coincide with Fed tightening, the market will face formidable obstacles, at least. Since currency risks are hedged, a strong dollar also has upsides, including lower costs from foreign operations and other inputs.For retailers, strength dollar value may be positive because goods of foreign origin will be purchased in a stronger currency and sold to US Consumers who pay in dollars. “Our view is that the market is will be more tolerant of currency effects from stocks that lag and have upward earnings adjustments, as opposed to intolerant of stocks that outperform and have lower earnings. Emanuel said. Emanuel released a list of companies that did well on July 10 but was flagged for reduced earnings revisions. On that list are IBM and Johns on and Johnson. Other companies with foreign sales on that list include Keurig Dr. Pepper and Kimberly Clark. Both companies report earnings next week. “This is a tactical rally of a bear market, and the market has unfinished business, and earnings to me is one of the more important factors,” Rauscher said.