Jump in Negative Currency Impact on Earnings

Today Kyriba released its Q1/2020 “Currency Impact Report.” This latest iteration of the quarterly report is the first to reflect the effects of the Covid-19 economic crisis. It reports that North American companies’ earnings per share fell by $10.77 billion, in aggregate, as a result of currency volatility last quarter. That’s 35 percent higher than in the fourth quarter of last year but still lower than in Q3/2019.

FiREapps (a Kyriba company) determines the degree to which currency headwinds are affecting corporate earnings by analyzing the frequency with which corporate leaders mention foreign exchange (FX) during quarterly earnings calls, along with the size of the FX impact—if the executives address the size of impact during their earnings call.

For the first quarter of this year, FiREapps studied 1,200 large publicly traded North American and European companies, all of which do business in more than one currency and earn at least 15 percent of their revenue overseas. Of those, 267 North American companies and 18 European companies reported a negative currency impact during their Q1/2020 earnings calls.

For companies based in North America, the currency most commonly referenced as suppressing earnings was the Brazilian real, with the euro following close behind. The Mexican peso was third most frequently mentioned, which isn’t shocking, as it was the second most volatile G-20 currency in Q1. The Chinese yuan and Australian dollar round out the top five.

The industries most impacted by currency volatility were healthcare equipment and supplies; professional services; machinery, trading, and distribution; chemicals; and biotech and pharmaceuticals.