(Repeats Friday story without change)
By Caroline Valetkevitch
NEW YORK, April 7 America First may be a main
policy of the White House and fuel to the stock market rally but
U.S. investors are looking overseas for stronger earnings as S&P
500 companies are set to report their first quarter of
double-digit profit gains since 2014.
A strong earnings season would help justify pricey stock
valuations, with the S&P 500 rallying this month to its most
expensive since 2004 on a forward price-to-earnings basis.
While the U.S. economy has gotten a lot of attention since
the Nov. 8 election and President Donald Trump's vows to boost
the domestic economy, data during the quarter has suggested the
global economy is strengthening.
That is welcome news for S&P components, since nearly half
of their sales come from overseas.
Shares of the biggest U.S. companies, which tend to have the
most overseas exposure, have been among the strongest performers
over the past several weeks. For instance, the S&P 500
has outperformed its average stock this year since
mid-February, after performing mostly in line at the beginning
of the year. [www.bit.ly/2oQPVXF
"The fact that we're seeing stabilization in the global
community will bode well for multinational companies and help
earnings for the first quarter," said Terry Sandven, senior
equity strategist at U.S. Bank Wealth Management in Minneapolis.
"You've also seen the dollar not appreciate as much as many
had forecast a quarter ago, so multinational companies may get
some relief on the (foreign exchange) line," he said.
A weaker dollar boosts offshore revenues when they are
translated into the U.S. currency. The U.S. dollar index
was down 1.8 percent in the first quarter, but it was still
cheaper during last year's first quarter.
STRONGER DATA AS EARNINGS LOOM
A survey this week showed euro zone business activity at a
six-year high. Forecasts from the International
Monetary Fund show a pickup in the global economy in 2017 and
2018, especially in developing economies.
However, some investors worry multinationals may have
already priced in big gains in earnings.
"As long as nothing changes, these firms are going to be
fine," said Jack Ablin, chief investment officer at BMO Private
Bank in Chicago, speaking of the strength of the largest
He warned, however, that stock prices may have taken in any
good news. "The market has certainly fully discounted all that."
The U.S. earnings season gets under way next week, with
results from banks JPMorgan Chase, Wells Fargo
and Citigroup among others.
The financial sector is projected to post a 15.4 percent
profit gain, second only to energy among S&P sectors.
Energy companies, which carried most of the losses that
extended an S&P 500 earnings recession until the second quarter
of last year, are expected to do most of the heavy lifting this
earnings season with a whopping 600 percent increase.
For the entire S&P 500, analysts are projecting earnings up
10.1 percent compared with a year ago, which would be the first
double-digit increase since the third quarter of 2014, according
to Thomson Reuters data.
Excluding the energy sector, S&P 500 earnings are expected
to be up 6.1 percent.
Revenue is expected to have jumped 7 percent, the most since
2011, which should help compensate for higher wage and other
costs facing companies, strategists said.
"We're seeing revenues contribute materially more to that
bottom-line growth," said Patrick Palfrey, senior equity
strategist at RBC Capital Markets in New York.
Big profit gains are expected in technology and materials as
well, the data showed.
"It comes down to a synchronized global economic
acceleration ...; a rebound and stabilization in commodity
prices and a higher interest rate environment," Palfrey said.
(Reporting by Caroline Valetkevitch; Editing by Rodrigo Campos
and James Dalgleish)