China’s coronavirus is no more limited to a region, rather it has become a global crisis. This deadly virus has already battered U.S. stocks and stock markets around the globe. However, some U.S. companies are feeling more of the pinch than others because of their exposure and dependence on the Chinese market. Thus, to help you better manage your portfolio, detailed below are the U.S. companies with the biggest exposure to China.
How could the coronavirus impact US companies?
As per the official figures, China’s coronavirus has already killed over 150 people and more than 7,500 confirmed cases have been reported in mainland China. Several confirmed cases have been reported worldwide as well, including five in the U.S.
Wall Street analysts have already expressed concerns that hotels, retailers, restaurants and manufacturing companies with high revenue exposure in China may take a hit. Those with factories in the country could be hit harder because the factories may remain closed longer due to an extended Lunar New Year shutdown. Chinese authorities have extended the holidays from January 30 to February 2 in an attempt to prevent the spread of the virus.
David Einhorn’s Greenlight had a strong fourth quarter; Gains on Neubase Therapeutics [Q4 Letter]
David Einhorn's Greenlight Capital was up 5.2% in 2020, underperforming the S&P 500's 18.4% return. For the fourth quarter, the fund was up 25%, which was its best quarterly result ever. Longs contributed 42% during the fourth quarter, while shorts detracted 15% and macro detracted 1%. Q4 2020 hedge fund letters, conferences and more Growth Read More
To protect themselves from the virus, Chinese citizens are not leaving their homes. Moreover, the government has also come up with travel bans, resulting in buyers staying away from the markets. The impact of the deadly virus is already being felt by many companies. According to CNBC, 27 S&P Composite 1500 companies mentioned the word “virus” or “coronavirus” on earnings calls this week.
US companies with biggest exposure to China
Considering how China’s coronavirus could impact the financial world, the following U.S. companies have the biggest exposure in China.
Apple – the company came out with an impressive earnings report on Tuesday. However, Apple’s guidance for the next quarter accounted for the impact of the coronavirus.
“We’ve currently closed one of our retail stores and a number of channel partners have also closed their store fronts. Many of the stores that remain open have also reduced operating hours,” Apple CEO Tim Cook said during the earnings call, adding “…retail traffic has also been impacted outside of this area cross the country in the last few days.”
Along with retail, Apple’s iPhone production could also take a hit. Some of Apple’s Chinese suppliers may not be able to meet the production deadline. Apple, however, said it is working with the suppliers to mitigate any production loss.
Starbucks – it has already closed more than half of its Chinese stores because of the virus. Even the stores that are open are seeing slow sales.
General Motors – the automaker has a manufacturing plant in Wuhan, the epicenter of the coronavirus. This plant has about 6,000 employees, or 10% of GM’s total workforce in China. Earlier, the company said that it is monitoring the situation closely and is asking employees who are not feeling well not to come to work.
Nike – the company earned $6.2 billion in revenue from the Greater China region in 2018. Since the past two years, China has been Nike’s fastest growing market.
McDonalds – the fast-food chain termed the virus as “concerning” in its earnings call yesterday. The company said it had closed all its outlets in Hubei province. McDonald’s CEO Chris Kempczinski said during the earnings call that China represents about 9% of their total restaurant count, but 4% to 5% of sales and 3% of operating income.
“And so while, again, China is a critical market for us and we’re very concerned about the situation over there, its actual impact on our business is going to be fairly small, assuming, again, that it stays contained to China,” the CEO said.
Along with these brands, other U.S. companies that have significant exposure in China are Estee Lauder, KFC, 3M, and A.O. Smith.
Hotel industry to take a hit
To contain the spread of the virus, China has restricted the travel of at least 35 million people across 15 cities and also closed major tourist destinations. Due to this, many U.S. companies in the hotel industry with big exposure to China may be impacted by the fast-spreading virus.
Names, such as Hilton and Hyatt Hotels have significant exposure in China, and thus, may be affected. Both of the stocks have seen a significant drop since earlier this week. Along with hotels, casino stocks are also feeling the heat as travel to the country has gone down drastically. Shares of Wynn Resorts, Las Vegas Sands and MGM Resorts International have been under pressure as well.
Bank of America even downgraded Wynn Resorts from Buy to Neutral. “Understandably, the Macau focused gaming names have traded off more than the broader market as they are 1) highly exposed to domestic Chinese travel, 2) the timing is concurrent with Chinese New Year,” Bank of America said Monday, according to CNBC.