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Netflix ( NFLX ), Pepsi raised FY guidance, citing weaker dollar

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BlackRock ( BLK ) saw positive impact of softer dollar on AUM

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Investors cautious about FX-driven earnings beats

By Shashwat Chauhan

July 22 (Reuters) - A slump in the dollar has come to

the rescue of some major multinational U.S. companies this

earnings season, easing the sting from President Donald Trump's

tariffs that have driven up costs and upended financial

planning.

A weaker dollar enhances the value of foreign earnings of

U.S. companies, while also making American exports more

competitive.

Companies such as Levi Strauss, Netflix ( NFLX ),

Pepsi and 3M ( MMM ), which generate significant revenue

from overseas sales, reported a boost to their April-June

earnings or raised their annual forecasts due to the slump in

the dollar.

The greenback has lost about 10% this year, due to

rapidly changing U.S. trade policy and worries about growth and

ballooning government debt.

Last week, PepsiCo ( PEP ), which relies on international business

for about 40% of its total net revenue, forecast a smaller

annual profit drop helped by a weaker dollar.

The dollar weakness "can be another source of upside that

helps solidify the narrative of a very solid earnings season,"

said Angelo Kourkafas, senior global investment strategist at

Edward Jones.

"However, there is a limit to how much credit investors will

give to companies that demonstrate a large upside surprise to

estimates just driven by currency trends."

Based on two decades of data, every 1% depreciation in the

dollar historically improves S&P 500 earnings per share growth

by about 0.6 percentage points, according to LSEG data. Roughly

38% of S&P 500 revenue is derived from international markets.

Information technology, consumer discretionary

, health care and industrial

companies have the highest international exposure.

"We originally expected over $100 million of headwinds from

a strengthening dollar and the reverse has happened," medical

equipment maker Edward Lifesciences CFO Scott Ullem said

at a Jefferies conference on June 4.

TAILWIND NOT ENOUGH

Still, a forex tailwind isn't always enough to reassure

investors, who are looking out for signs of real growth as

skittish consumers curb spending.

Investors typically do not reward FX-driven sales beats the

way they reward constant-currency beats, Goldman Sachs

strategists said in a note.

"In many ways, investors should consider some of these

things as transitory or one-time adjustments that are not

sustainable," said Michael Arone, chief investment strategist at

State Street Investment Management.

Netflix ( NFLX ) shares declined more than 4% on Friday as

some investors were disappointed by a revenue forecast raise

that was driven more by a weaker dollar than strong demand.

Here's a list of some the companies that noted a

currency-related impact in their latest earnings:

Company Ticker Currency Impact Additional

Notes

3M Positive impact

from weaker USD Q2 profit:

$2.16/share

vs. $2.01

estimate

BlackRock Compared to

Positive FX $35.45B

impact of $171.52 decline YoY

billion on AUM

Garmin Positive benefit Raised

from FX shifts full-year

revenue

growth

guidance to

15%

Omnicom FX translations Q2 revenue

led to 1.1% boost

revenue increase

Concentrix Expected ~140 bps Compared to

positive FX previous

impact for Q3 year

BNY Favorable FX Driven by

impact market

contributed to values,

13% rise in inflows, and

assets under weaker USD

custody/admin

(Reporting by Shashwat Chauhan in Bengaluru; Editing by

Saumyadeb Chakrabarty)