The weak U.S. dollar and improving global GDP growth have helped multinational companies with a large international footprint and bolstered large-cap ETFs as the current earnings season revealed higher global revenue.
For example, the targeted WisdomTree U.S. Export and Multinational Fund (NYSEArca: WEXP) rose 3.3% over the past month and gained 6.2% over the past three months, whereas the S&P 500 was up 1.2% over the past month and 5.1% higher in the past three months while the Russell 2000 was down 2.1% over the past month and up 5.9% over the last three months.
WEXP tracks U.S. based companies that derives less than 60% of their revenue from the United States and the underlying index also employs a modified earnings stream weighting process that adjusts the earnings for each company based on revenue from outside the U.S.
“Now that more than 90% of the companies in the index have reported results for Q3, did S&P 500 companies with higher global revenue exposure outperform S&P 500 companies with lower global revenue exposure in terms of earnings growth and sales growth for Q3 2017? The answer is yes,” reports John Butters for FactSet.
Looking at those companies that have reported earnings results, the earnings growth rate for the S&P 500 over the Q3 2017 was 6.1%. Among those that generate more than 50% of sales domestically, the earnings growth rate was 2.3%. For those that generate less than 50% of sales domestically, the earnings growth rate was 13.4%.
Fueling the outperformance of S&P 500 companies with higher global revenue exposure, information technology and energy sectors were the largest contributors to earnings and revenue growth in the third quarter for S&P 500 with a more global footprint. If these two sectors were excluded form the Q3 tally, the earnings and revenue growth rates for S&P 500 companies that generate less than 50% of sales inside the U.S. would have been 0.7% and 5.7%, respectively.
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