FX Impact on Earnings: Smaller but Still Significant

Nearly one in four large North American companies reported that currency movement had a negative impact on earnings in Q3/2019.

Foreign exchange (FX) continues to have a significant effect on corporate earnings in developed economies. The degree to which currencies are impacting earnings has moderated since early 2019, but North American companies experienced a total of more than $11 billion in currency headwinds in the third quarter of 2019.

This is the headline news from the latest edition of Kyriba’s (formerly FiREapps’) quarterly “Currency Impact Report.” The company reviewed earnings calls from approximately 1,200 large, publicly traded multinationals based in North America and Europe. Among those organizations, 296 reported that FX issues had reduced their earnings in Q3/2019, and 269 quantified that reduction.

For North American companies that quantified negative currency impacts, those FX headwinds reduced earnings by an average of $44.41 million, which equates to $0.03 per share. According to Kyriba, these figures likely underestimate the aggregate impact of currency movement on corporate earnings, since many companies do not report the headwinds they experience.

The euro was the most impactful currency for North American businesses, affecting 46.2 percent of all companies that brought up FX headwinds on earnings calls. The British pound, Argentine peso, Australian dollar, and Chinese yuan rounded out the top five currencies placing the biggest drag on North American companies’ earnings in Q3/2019.