As Q2 earnings season winds down, BTIG’s Dan Greenhaus makes this observation about where things stand:
On the company specific front, it was not an unimportant week as a number of companies reported including buy rated DIS and NWSA, neutral rated CVC and RL, MNST, PCLN, KSS, JCP and FOSL. This week brings a host of retail names including TGT, TJX, SHLD, LTD, WMT, GPS and ANF as well as HD, EL, A, CSCO, NTAP and AMAT (see updated earnings table below). This week, we’ll put out our Q2 conference call roundup but we can say that two themes emerged quite clear; FX translation was a huge problem for a number of companies and despite everyone’s best efforts “uncertainty” remains the order of the day.
The “uncertainty” issue may seem obvious, as it’s something that’s been with us for the last 5 years.
The FX translation issue may not be quite as well understood, but all you have to do is look at this chart of the trade-weighted dollar index over Q2.
The dollar strengthened fairly significantly against the rest of the world’s currencies in the quarter, meaning that all overseas sales came out to a bit less once translated back into dollars.
It’s one reason why, for the first time in 20 years, companies with less foreign exposure, are outperforming those with more.
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