The dollar’s climb against foreign currencies took a deeper toll on U.S. corporate revenue last quarter, eroding overseas sales for products spanning Pepsi to Post-it notes to shampoo.
3M Co. cut its 2015 profit forecast after first-quarter results missed analysts’ estimates, while PepsiCo Inc. said that exchange rates will cut annual earnings by 11 percentage points, up from a previous projection of 7 points. Sales also fell short of estimates at Procter & Gamble Co., which gets most of its revenue from abroad.
Thursday’s earnings reports on the busiest day for Standard & Poor’s 500 Index companies underscored the foreign-currency struggles for U.S.-based companies that operate abroad. Of 180 S&P 500 companies reporting quarterly results so far, sales trailed estimates by an average of 0.8 percent even as profits topped projections, according to data compiled by Bloomberg.
“This is the new world,” PepsiCo Chief Financial Officer Hugh Johnston said in an interview. “The world is just a more volatile place than it was as recently as five or six years ago. The volatility is a constant for us.”
All three companies fell Thursday, bucking gains for broader U.S. indexes, with declines of 3 percent for 3M, 2.6 percent for P&G and 1.6 percent for Purchase, New York-based Pepsico. The dollar surged 23 percent against an index of major currencies at the end of the first quarter from a year earlier.
PepsiCo, the world’s largest snack maker and second-biggest beverage company, vowed to keep a tight lid on expenses this year as it grapples with the stronger dollar.
While first-quarter earnings beat estimates, the currency effect turned what would have been a 4.4 percent sales gain into a 3.2 percent decline. That puts more pressure on Chief Executive Officer Indra Nooyi to prove she can run the business efficiently, especially after warding off a campaign last year to break up PepsiCo’s snack and beverage operations.
Like P&G, 3M gets most of its revenue from outside the U.S., leaving the St. Paul, Minnesota-based company vulnerable to the greenback’s rally. Full-year earnings will be $7.80 to $8.10 a share, below the previous range of $8 to $8.30, 3M said Thursday, citing a greater effect from foreign currency than it initially expected.
At P&G, the world’s largest consumer-products maker, third-quarter revenue fell 7.6 percent to $18.1 billion. Analysts estimated $18.4 billion for the Cincinnati-based company, according to data compiled by Bloomberg.
“As we have done before, we’ll offset foreign exchange over time through a combination of pricing, mix enhancement and cost reduction,” CEO A.G. Lafley said in a statement.