U.S. exporters are growing faster than companies that do most of their
business at home, a sign that trade spats and rising costs for things
like labor and commodities aren’t yet derailing the corporate profit
expansion.
Firms with large overseas businesses have reported 12% growth in
revenue so far for the second quarter, according to Credit Suisse.
That’s nearly double the rate of growth for domestic-focused firms.
Exporters’ profit growth for the second quarter is also beating Wall
Street expectations. Earnings have jumped 23% from a year earlier, above
17% growth for domestic firms.
Investors have worried in recent months that tariff fights between the
U.S. and China, Europe and Canada would hurt multinational firms that
rely on overseas sales. Companies are also struggling with labor
shortages and higher costs for things like raw materials and
transportation.
Those fears had encouraged investors to dump shares of exporters in favor of domestic-focused companies.
The Russell 2000 Index—composed of smaller firms with less foreign
exposure—is up 10% this year, compared to a 6.1% gain for the S&P
500 and 3.3% for the Dow Jones Industrial Average.
Earnings reports from companies including Honeywell International Inc.
and Boeing Co. indicate that strong economic growth is offsetting those
pressures for now.
During its earnings call this month, Honeywell described the impact of
tariffs as “minimal” while raising its 2018 sales guidance. Aviation
giant Boeing, whose shares have been hard-hit by tariff concerns this
year, on Wednesday boosted its revenue outlook amid strong global
demand.
“We’re not necessarily hearing companies voice an overwhelming amount
of concern about trade,” said Patrick Palfrey, an equity strategist at
Credit Suisse. “For all the concerns, demand is still there, consumers
are still opening up their wallets."
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