Stronger Dollar Punishes U.S. Earnings From P&G to DuPont
Comment of the Day

January 27 2015

Commentary by Eoin Treacy

Stronger Dollar Punishes U.S. Earnings From P&G to DuPont

This article by Cécile Daurat for Bloomberg may be of interest to subscribers. Here is a section: 

Other companies, like Honeywell International Inc., were able to anticipate the currency changes. Back in October, Honeywell CEO Dave Cote reversed his policy and started using currency hedges because he was -- rightly -- concerned the euro may sink further.

?3M Co. today was another example of a global business weathering the dollar strength, partially with currency hedges. The St. Paul, Minnesota-based manufacturer beat fourth-quarter earnings estimates, countering the negative effects of foreign- exchange rates with stronger sales, especially in fast-growing markets.

P&G, which makes about two-thirds of annual sales outside of the U.S., said currency effects will continue to be a drag in the current fiscal year and reduce sales by 5 percent, leading to a decline of as much as 4 percent from a year earlier. Like Kimberly-Clark Corp. and other consumer companies, Cincinnati- based P&G was especially hurt by a slump in Venezuela, where falling oil prices have heightened the bolivar’s volatility.

Bristol-Myers, the New York-based maker of cancer treatments such as Yervoy for melanoma, gets about half its sales outside the U.S. The dollar’s strength weighs down the company as it pursues growth by focusing on a new class of cancer drugs.

Eoin Treacy's view

The big fall in oil prices and the big rally in the Dollar continue to influence decisions in boardrooms. 3M and Honeywell were little changed today following their results not least because their currency hedging strategies paid off. Following a quarter where companies that hedged their exposure outperformed, we can anticipate that more companies will be hedging their currency exposure by the end of this quarter. 

Microsoft’s decline today broke its progression of higher reaction lows and it will need to sustain a push back above the 200-day MA to reassert medium-term demand dominance. 

P&G has returned to test the region of the 200-day MA and the upper side of its underlying range. It will need to hold in this area if medium-term potential for additional upside is to continue to be given the benefit of the doubt. 

Hewlett Packard shares a similar characteristic following today’s announcement.

DuPont bounced from the region of its 200-day MA following today’s earnings announcement. 
Caterpillar has returned to test the lower side of its four-year range and will need a clear upward dynamic to signal a return to demand dominance. 

Following its earnings surprise last week, UPS has at least paused in the region of $100 and the region of the 200-day MA. 

Boeing’s earnings announcement is tomorrow. The share has been ranging with a mild downward bias for a year and is currently testing the region of the most recent lower high. Tomorrow’s announcement has the potential to act as either a bullish or bearish catalyst.  

Colgate Palmolive is currently testing its MA in what has so far been a consistent trend and its earnings announcement is on Thursday. Dow Chemical which is currently testing its October lows is also due to report on Thursday.  

Estee Lauder reports on February 5th. The share’s chart pattern is noteworthy because it has experienced a marked loss of momentum since mid-2013 and is currently testing the most recent low.  It needs to hold the $70 area if top formation completion characteristics are to be avoided.


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