Even as the U.S. economy barely grew in early 2014, companies with a
domestic orientation have on balance delivered better first-quarter
sales and profit growth than their globally oriented peers.
RBC Capital Markets found that sales growth among companies with a
high percentage of their revenue coming from the United States was
three times stronger than those with a bigger international sales
mix. Earnings growth was six times as robust. U.S.-focused names had
bigger upside surprises on both the top and the bottom lines.
"With the U.S. economy vaulting energetically out of its winter cold
spell but China looking even more beset by gravitational forces ...
the two-speed developed market-vs-emerging market global recovery
... is growing more clear and present," analysts at Nomura wrote in
a note to clients.
Companies with U.S.-oriented revenue rank among the year's leading
advancers in the S&P 100 Index <.OEXA>.
Anadarko Petroleum Corp <APC.N>, which gets more than three-fourths
of its revenue from the U.S. market, is up nearly 27 percent in
2014. In its latest quarter, the company's revenue grew 50.1
percent, representing an upside surprise of almost 50 percent
compared with expectations.
Utilities are 2014's runaway outperformers, with the S&P utilities
index <.SPLRCU> up nearly 11 percent. Utilities also have some of
the highest U.S. revenue exposure. The stock of Exelon Corp <EXC.N>
is up 32.2 percent in 2014; in its latest quarter, Exelon posted
revenue growth of 17 percent, good for an upside surprise of 28
percent relative to analysts' forecasts.
Power sector-focused funds have attracted inflows of almost $2
billion in 2014, according to Thomson Reuters' Lipper, though the
sector is also favored as a defensive or dividend play, offering an
average yield of 3.7 percent.
Conversely, technology companies have the highest percentage of
foreign revenue exposure, according to Standard & Poor's. The group,
which has sold off recently on concerns that valuations are
stretched, has had outflows of $1.25 billion this quarter, according
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Qualcomm Inc <QCOM.O> and Broadcom Corp <BRCM.O> have more than 94
percent of sales coming from abroad and both disappointed in their
most recent results, with Chinese growth a major factor.
The week ahead will feature earnings from several companies
representing both the domestic-leaning and international camps.
Applied Materials <AMAT.O>, which gets about 80 percent of its
revenue from abroad, will report results next week. Analysts expect
the company to post revenue growth of 19 percent.
Deere & Co <DE.N>, which gets 63 percent of its sales domestically,
is set to report earnings on Wednesday, while Wal-Mart Stores Inc
<WMT.N>, the largest of a slew of retailers reporting next week, is
due to post results on Thursday. Wal-Mart gets 71 percent of its
revenue from the United States.
(Editing by Dan Burns and Jan Paschal; For the U.S. stock market
report, click <.N>)
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