With the U.S. economy faring relatively well and the Federal Reserve signaling its first interest rate hike in nearly a decade, the dollar is on the march. Expect U.S. multinationals to highlight the negative impact of "currency swings" even more at the next earnings season. Apple (NASDAQ:AAPL), Google parent Alphabet (NASDAQ:GOOGL) and Tesla Motors (NASDAQ:TSLA) will all feel effects, but not all at the same intensity. Here's why.
Apple China Sales Double, Yuan Stable
Apple's greater China sales in the last quarter nearly doubled vs. a year earlier to $12.5 billion. That's more than the tech titan earned in Europe and was nearly a quarter of Apple's $51.5 billion in revenue overall.
China's appetite for the iPhone remains ravenous. But Apple also benefited from the fact that the yuan has largely kept pace with the U.S. dollar.
While China's August devaluation got a lot of headlines, the dollar has only risen 4% vs. the yuan over the last four years. (That's also good news for Starbucks (NASDAQ:SBUX) and Yum Brands (NYSE:YUM), which have large and growing China operations.) The yuan's relative stability compares to the dollar's double-digit gains vs. the euro and yen, not to mention more than 50% vs. the Russian ruble and Brazilian real.
Google's $1.3 Billion Currency Problem
Google's Alphabet has a very different situation from Apple. The search and Android giant gets 53% of its revenue from overseas. But virtually none of that is from China, where censorship and other issues limit its access to the world's largest and fastest-growing Internet market. Instead, Alphabet gets its revenue from the eurozone, Russia, Brazil and other places with sharp currency depreciation, not to mention economies with scant growth or outright recessions.
Alphabet said currency swings reduced revenue by $1.29 billion — $1.58 billion before hedges. Excluding foreign exchange effects, Google revenue would have risen 21% vs. the actual 13%.
Tesla Motors: Heavy Wears The Krone
Tesla Motors has achieved technological marvels with its all-electric cars that boast long battery life and "ludicrous" speed. But even Elon Musk can outrun currency shifts. Tesla suffered a Q3 non-GAAP net loss of $75 million, or 58 cents per basic share. Roughly 20% of that was due to "revaluation of our foreign currency holdings and finished goods inventory held by our foreign entities. Q3 weakness in the Norwegian krone, Canadian dollar and Chinese yuan had the largest impacts."
Despite their different experiences, Apple, Alphabet and Tesla all gapped higher after their latest earnings reports.
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