Ford Motor Company (NYSE:F), MONDELEZ INTERNATIONAL INC (NYSE:MDLZ), Apple Inc. (NASDAQ:AAPL), McDonald’s Corporation (NYSE:MCD) 4 Stocks Reporting this Week Impacted by Brexit
Late last month the British people voted to leave the European Union in historic fashion. Global markets initially struggled to comprehend the magnitude of the news, only to surge to record highs over the next few weeks. However, the story is still unfolding. With earnings season well underway, it is becoming more apparent that Brexit is creating a layer of uncertainty that will influence future earnings. The dwindling value of the Pound and Euro after the vote will be the biggest obstacle to revenue growth for the remainder of the year. U.S. multinationals with the largest exposure to Europe have already seen earnings expectations trend downwards for future quarters. Some of them include companies scheduled to report next week such as McDonald’s, Ford, Mondelez and even Apple.
Ford Motor Co. (F) Consumer Discretionary – Automobiles
Ford Motors is the most iconic automaker in American history with earnings that can finally back it up. Over the past year Ford recorded double digit bottom line gains and high single digit revenue growth in each quarter. Unfortunately, it’s historic rebound might be short lived.
Amongst the American automakers, Ford has the largest presence in the United Kingdom and is expected to be hardest from Brexit. Last year the automaker sold over 1 million vehicles in 20 markets that make up Europe. What’s more concerning is a third of those sales were in the U.K. where many experts are calling for a recession. Ford has already considered cutting jobs in the area to offset some of the losses they are set to incur. Besides the negative impact of weak exchange rates, large macroeconomic events often postpone large consumer purchases like a new car. Any indications of Brexit in the upcoming earnings call could be enough to send the stock plunging.
As for earnings, the Estimize consensus is calling for earnings per share of 62 cents on $36.74 billion, reflecting a 31% increase on the bottom line and 1% decline on the top from a year earlier.
McDonald’s Corp (MCD) Consumer Discretionary – Hotels Restaurants & Leisure
McDonald’s is one of the best turnaround stories of the past year. After Steve Easterbrook took the position of CEO in March 2015, the company has only looked up. The introduction of all day breakfast and featured promotions such as the McPick 2 have been key drivers in the past few quarters. In fact, McDonalds has posted positive comps for the past 3 quarters on stronger traffic trends in domestic markets. Unfortunately, it’s run might be short lived. Earnings face a number of near term risks one of them being the Brexit. McDonald’s has the largest exposure to Europe amongst U.S. traded restaurants. Europe currently accounts for 37% of its total revenue with the U.K. just behind at 9%. Credit Suisse recently cut same store sales estimates and lowered their price target in light of Brexit. The Estimize community has also started to lower its earnings and revenue targets to reflect the growing uncertainty. This quarter the consensus data is looking for earnings per share of $1.40 on $6.33 billion in revenue, reflecting an 11% jump on the bottom line and 3% drop on the top.
Mondelez (MDLZ) Consumer Discretionary – Hotels Restaurants & Leisure
Mondelez is best known for manufacturing popular snacks served around the world such as Oreo, Chips Ahoy, and Cadbury. After a down 2014, the snack company has shown new signs of life. Steady marketing improvements and cost cutting initiatives have started to pay dividends in the form of increasing earnings and revenue growth. Last quarter featured gains in many of its key financial metrics. Organic revenue growth saw its biggest gain in developed markets like Europe and North America. But that is soon to change given Mondelez’s presence in Europe.
More than one third of its $30 billion in annual revenue is generated in Europe. In fact, the United Kingdom is Mondelez’s top market in Europe due to the popularity of Cadbury. Cadbury is Britain’s top selling chocolate and a large source of Mondelez’s income in the region. However, after Brexit sent the Euro and Pound plunging, earnings are prepared to suffer. The upcoming quarter is expected to see earnings drop by 9% with sales down as much as 17%, according to the Estimize consensus data. Future quarters could be far worse once Brexit aftermath takes hold.
About 12 months ago, rumor broke that iPhone sales had stalled and a decline in earnings was soon to follow. These reports turned out to be true and in the past year Apple has found limited success. Last quarter revenue growth turned negative for the first time in 13 years, largely due to wavering demand for iPhones. Sales of the phone were down 16% from the 61 million sold in the year prior. It’s expected that these trends continue to be a problem throughout 2016 and perhaps 2017. To top it off, Apple has a huge presence in international markets, particularly Europe and Britain. The strong dollar created from Brexit fallout is likely to come at the cost of future sales. Analysts within the Estimize community have started to cut estimates for the quarter to be reported and fiscal fourth quarter to reflect Brexit uncertainty and slower iPhone sales. For FQ3, the consensus data is looking for earnings per share of $1.42 on revenue of $42.11 billion, a 22% decline on the bottom line and 14% on the top.
How do you think these names will report this week? Be included in the Estimize consensus by contributing your estimates here!
Photo Credit: Ben Cremin