Monday, July 16, 2007

Substantial Increase in Foreign Sales by U.S.Companies in the S&P 500 Index

Standard & Poor's recently released a report detailing the growth in foreign sales by companies represented in the S&P 500 Index. The report notes S&P 500 companies generate over 44% of sales from overseas. This compares to approximately 32% in 2001.

(click on chart for larger image)

foreign sales percentage for S&P 500 companies as of 2006
Howard Silverblatt, Senior Index Analyst at Standard & Poor's notes:
"The significant increase in foreign sales by U.S. companies over the past five years is due to the rapidly expanding foreign market for goods and services. We believe that the present trend will continue with greater portions of U.S. products being produced and sold abroad.”
As noted in S&P's press release dated July 9, 2007:
Standard & Poor’s findings were based on fiscal year 2006 data for issues with full reporting information, representing 53.7% of the S&P 500’s market value. Standard & Poor’s also calculated that an additional 0.95% of sales was generated from U.S. produced goods and services that were exported abroad, down from the 1.14% reported in 2005.
The positive impact for U.S. firms has come from the weaker dollar. With a weaker US dollar, companies report higher sales as the foreign currency is converted back into the Dollar. A key point for investors is what event(s) will cause the Dollar to strengthen and reverse this earnings enhancing tailwind?


Foreign Sales by U.S. Companies on the Rise, Says S&P
Standard & Poor's
By: David R. Guarino and Howard Silverblatt
July 9, 2007,3,2,2,1148445747756.html

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