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Strategies & Market Trends : Galapagos Islands -- Ignore unavailable to you. Want to Upgrade?

To: Techplayer who wrote (37992)	4/28/2003 3:35:37 AM
From: stevenallen	Respond to of 57110

Riding the Dollar AHEAD OF THE TAPE By JESSE EISINGER The recent trading pattern for earnings has been broken this quarter. This time, there hasn't been the selloff we've seen for the past several quarters. One reason is earnings are significantly better than expected and revenue seems to be solid. Earnings are up 11.7% for the first quarter for the 329 companies in the S&P 500 that have reported, better than the 8.5% predicted on April 1, according to Thomson First Call. But there's a nagging question: How much is due to the weak dollar? As the dollar weakens, U.S. companies receive more dollars per unit sold when they translate sales from foreign currencies. A lower dollar is good if it makes U.S. companies more competitive, spurring foreigners to buy more American stuff. But if they are buying the same amount of stuff and it only appears as more dollars on income statements, then it's just a one-time boost that has nothing to do with management. Which sectors get the most bang from a weak buck? Tech, the once-and-future darling of the stock world, is a major beneficiary. There isn't solid analysis about what the true currency impact on the first-quarter results has been, since the SEC quarterly filings aren't out. But Credit Suisse First Boston's Ryan Nolan Renicker, a Texan whose says his parents claim they weren't naming him after the fastball hurler, did an analysis on companies that filed SEC quarterly numbers for periods ending Feb. 28. That gave him a look at two of the three months of the first quarter. The sample comprised 17 companies, including Oracle, Morgan Stanley, FedEx and General Mills. The results: Foreign-currency gains accounted for roughly 8.5% of the "typical" large-cap stock's net income, according to Mr. Renicker's analysis. During that period -- December through February -- the dollar depreciated against the euro by about 8.4%. A year earlier, foreign-currency losses took away roughly 5.8% of the "typical" large-cap stock's net income. During that period, the dollar appreciated against the euro by about 3.7%. These companies beat earnings by an average of about 10.8% this year. Last year, they beat by about 6.7%. It's a nice improvement, but it looks like the extra height comes from standing on the dollar. Updated April 28, 2003