P&G Only One of Many Hit by Foreign Exchange Rates (PG, PEP, KMB, CL, KO, PM, MCD, F, CCL)

Over the last 12 months, the US dollar has appreciated about 9% against a basket of currencies (DXY) and about 11% versus the euro. The dollar is about 2% weaker versus the Japanese yen and about 11% stronger versus the Swiss franc. Against the Chinese yuan, the dollar is about 2% weaker than it was a year ago, but that’s substantially stronger than the 4% difference in January of this year.

Therein lies the problem: a stronger dollar in the Eurozone and in China hits US companies and shareholders right in the wallet. Here are some other companies that have pointed to exchange rates as potential trouble spots.

Pepsico Inc. (NYSE: PEP) announced yesterday that the company expects exchange rates to cut -3% from earnings in fiscal year 2012, up from a negative impact of -2% in April. Even translating to constant currency Pepsi expects earnings to fall by -5%. The problem here is bad management, not foreign governments being unwilling to loosen currency rates.

The Mexican subsidiary of Kimberly-Clark Co. (NYSE: KMB) recently noted that if the peso remains weak compared with the dollar, earnings could suffer.

Colgate-Palmolive Co. (NYSE: CL) posted strong first quarter earnings because the company stripped out the effects of currency translations on the bottom line. That is not unusual, of course, but comparing quarterly performance on a constant currency basis hardly gives an accurate picture of how the company is performing in today’s economy.

Coca-Cola Co. (NYSE: KO) suffered negative currency translation effects in the first quarter that cost the company -8% of its revenue in Eurasia & Africa and -6% of its revenues in Latin America. Overall the unfavorable impact of currency exchange rates cost Coke -1% of operating revenues in the first quarter.

Philip Morris International Inc. (NYSE: PM) first quarter currency gains totaled less than half the previous year’s gain of nearly $1 billion. Currency translations cost shareholders -$0.02 in EPS for the quarter, and the company forecast a full-year impact of -$0.15/share for currency effects.

McDonald’s Corp. (NYSE: MCD) recently said currency translation effects will cost shareholders -$0.07 to -$0.09 per share in the second quarter.

Ford Motor Co. (NYSE: F) did not specify an exact amount, but did note in the company’s first quarter earnings report that unfavorable exchange rates contributed to a year-over-year drop of $294 million in first quarter auto sales.

Carnival Corp. (NYSE: CCL), in addition to the damage done to the company by the wreck of the Costa Concordia, expects fuel costs and currency exchange rates to cost its shareholders -$0.40 in earnings in 2012.

Paul Ausick