S&P 500 Foreign Revenue Increases in 2012: GoldmanVW Staff
Goldman Sachs is out with a new report on S&P 500 foreign revenue based on 10K filings for the first quarter of 2013 and 2012. Foreign revenue increase has helped firms boost their top line overall in 2012. The biggest winner according to the report …. energy based companies. A brief summary followed by the full report below:
S&P 500 Foreign Revenue
Uncertain growth in Asia and Europe combined with FX concerns have supported stocks with high US sales relative to firms with high international revenue exposure so far in 2013. Following two weeks of outperformance to start the year, our sector neutral equal-weighted basket of 50 S&P 500 stocks with the highest concentration of international sales exposure has lagged our Domestic Sales basket by over 250 bp in 2013. Our basket of stocks with the highest BRICs exposure has lagged the Domestic Sales basket by almost 450 bp.
Consensus expectations for 2013 sales and earnings growth support the recent outperformance of domestically-exposed stocks but 2014 estimates are stronger for firms with higher international exposure. Bottom-up consensus expects the median stock in our Domestic basket will grow 2013 earnings by 9%, faster than the 6% expected for the BRICs basket and in line with the International Basket. In 2014, however, the International and BRICs baskets are each expected to grow median earnings by 13% compared with 9% for the Domestic Sales basket. All three baskets trade in a one P/E multiple range of each other.
Performance this year has continued a marked shift in investor preference away from foreign-facing stocks. Beginning in 2011, policy and economic risks in Europe and concern over slowing growth in China led investors to seek the relative stability and safety of domestic-facing firms. Despite stretches of outperformance by internationally-exposed stocks in 1Q 2011 and 1Q and 4Q 2012, during the past two years the Domestic basket and S&P 500 have each returned over 35% vs. 20% for the International and BRICs baskets.
Previously, investors pursued faster economic growth overseas relative to domestic growth, seeking faster sales and earnings growth, and hence better returns, in firms with a larger percentage of international sales compared with more domesticallyoriented firms. From late 2007 through 2010, the International basket returned +2% vs.
-13% for the Domestic basket and -11% for the S&P 500.
This report updates and rebalances the company constituents in four sector-neutral baskets of US stocks constructed on the basis of geographic revenue exposure:
S&P 500 Foreign Revenue Details:
1. International Sales
50 companies with high non-US sales. The median stock in the basket generates 75% of its revenue outside the US compared with 30% for the median S&P 500 company and 34% for the S&P 500 in aggregate. 9 constituents have changed. The basket has returned 16% YTD compared with 15% for the S&P 500.
2. Domestic Sales 50 companies with the highest concentration of US sales. The median stock generates 100% of its revenue inside the US. 13 constituents have changed. The basket has returned 15% YTD.
3. Western Europe Sales 50 companies with high sales exposure to Western Europe. The median stock in the basket earns 21% of its revenue in Western Europe explicitly, 33% in Europe and 66% outside the US. 14 constituents have changed. The basket has returned 23% YTD.
4. BRICs Sales 50 companies with high sales to BRIC countries (Brazil, Russia, India and China). The median stock earns 31% of its revenue in the BRICs regions and 72% internationally. 12 constituents have changed. The basket has returned 14% YTD.
We analyzed company 10-K filings to determine the total international sales exposure of stocks in the S&P 500. The Financial Accounting Standards Board (FASB) requires companies to disclose any geographic segment contributing 10% or more of revenues. Our screen may miss some foreign revenues that are not divulged due to this limit. Firms have discretion over regional classifications, so precision varies by company. We supplement
exposure disclosed in 10-K filings using Goldman Sachs analyst estimates.
Foreign sales accounted for 34% of aggregate revenue for the S&P 500 in 2012, up from 33% in 2011. The median stock reported 30% of sales outside the US. Companies reported that 13% of revenues came from EMEA (Europe, Middle East, and Africa), with 7% directly attributable to Europe. Approximately 8% of revenues stems from the Asia and Pacific region with 1% disclosed as coming specifically from Japan and 1% from China.
Despite the proximity to the US, only 6% of revenues reported was from non-US Americas (Canada and Latin America). The remaining 6% of revenues was foreign but unclassifiable (see Exhibit 1).