Strengthening Greenback's Advantage: These European Corporations Reap Benefits from a Robust US Currency
The Euro's Slump and the US Dollar's Ascendancy:
While the Euro clings to a precarious position above parity, the US dollar continues its ascent, leaving some European businesses reaping an unexpected windfall in profits. Specifically, companies with a heavy focus on US sales are thriving, thanks to the currency effect, and reporting impressive growth. A new study by Goldman Sachs sheds light on the big winners. Take construction behemoth Hochtief and Dutch service powerhouse Wolters Kluwer, for example.
Hochtief's Building Boom Beyond Europe
Hochtief, a majority-owned Spanish ACS entity, raked in an impressive 64% of its revenue in the US during the first nine months of 2024. Another 31% came from its Australian subsidiary. This development has allowed Hochtief to unprecedentedly boost both its revenue and profit growth in double digits. The growth has been particularly pronounced in the IT sector—increasing demand for cloud computing and AI technologies is fueling the construction of new data centers. Hochtief's subsidiary Turner, in partnership with two other companies, is currently constructing a data center for Meta at an estimated cost of ten billion US dollars. Another order following shortly, valued at two billion, is further evidence of this trend.
Wolters Kluwer's USA Stronghold and AI Innovation
Wolters Kluwer also stands to profit from the US dollar's strength. Specializing in specialized information, software, and services, the Dutch company recorded substantial increases in both revenue and profit during the same period. A staggering 83% of its revenue was recurring. Wolters Kluwer places significant emphasis on AI integration into its software, positioning itself for continued market leadership and securing a strong foundation for long-term growth opportunities.
By exploring these European companies that seem to thrive despite—or even because of—the Euro's decline, you'll discover the reasons behind their unexpected triumphs and find out which other companies might find themselves on the winners' list in the current issue of BÖRSE ONLINE.
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Enrichment Insights:
While a strong US dollar can impose challenges for many European companies by causing increased costs for imports and potentially reducing competitiveness, certain European companies benefit from their substantial exposure to the US market. Here's a look at a few key reasons for these gains and companies potentially seeing advantages:
- Diversification and Dollar Exposure:
- Large European companies with substantial assets and sales in the US can benefit when the US dollar strengthens, as it increases the value of their US-derived revenues when converted back to euros.
- Companies like Nestlé, Sanofi, Novartis, and GlaxoSmithKline, with considerable US operations, might benefit from dollar exposure.
- Sector-Specific Advantages:
- Pharmaceuticals and Healthcare: Large pharmaceutical companies like Roche, Novartis, Sanofi, and GlaxoSmithKline have substantial US market presence, generating significant dollar-denominated revenues.
- Defensive Sectors: Companies in defensive sectors like utilities (e.g., Enel, E.ON) might see increased investor interest due to their stable cash flows and reduced dependence on economic cycles, although the benefits from a strong dollar here are less pronounced.
- Export-Oriented Industries:
- While not directly gaining from a strong dollar, companies with a high export ratio might find increased competitiveness in other markets due to the Euro's relative weakness. However, this benefit is more about the euro's weakness rather than a direct advantage from the dollar's strength.
In essence, European companies with substantial US operations or significant dollar-denominated revenue streams are likely to benefit from a strong US dollar, particularly if they effectively diversify their revenue sources across different currencies and markets.
Investing in companies like Hochtief and Wolters Kluwer could yield attractive returns, given their underscored growth and US dollar revenue, as evidenced by their impressive gains in the first nine months of 2024. Additionally, other European firms, such as Nestlé, Sanofi, Novartis, GlaxoSmithKline, Roche, Enel, and E.ON, with substantial US operations or dollar-denominated revenues, might also profit from a strong US dollar.
