To Wall Street, The Greenback's Fall Isn't All Bad

It's no secret that the weak dollar spells stronger profits for some U.S. companies. What may be unappreciated, however, is its positive effect on the overall corporate earnings outlook.

On average since World War II, notes Jeffrey M. Applegate of CS First Boston, foreign profits of U.S. corporations have grown about 9% a year, compared with a 6% rate for domestic-only U.S. profits. In the 1990s, though, the foreign profits growth rate has slipped to 2%, mainly as a result of the European recession.

That should change this year and next, as the weak dollar reinforces the impact of recovery overseas on demand for U.S. exports and on the performance of foreign subsidiaries of U.S. multinationals. The foreign share of profits earned by U.S. corporations, says Applegate, should rise from 25% at the end of 1993 to 30% by the end of 1995. Although U.S. growth will slow, he thinks rising foreign and export profits will be enough to keep S&P 500 operating earnings rising by at least 15% this year and 8% in 1995.

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