Apr. 8 - The sinking Japanese yen could have an impact on U.S. corporate earnings- but not all exposures are created equal. Bobbi Rebell reports.
It's a case of when, not if, U.S. companies feel the impact of the falling Japanese yen, after the Bank of Japan's aggressive stimulus plan was implemented last week. About half the companies in the S&P 500 break out their Japan exposure. S&P Dow Jones Indices Howard Silverblatt: SOUNDBITE: HOWARD SILVERBLATT, SENIOR INDEX ANALYST, S&P DOW JONES INDICES (ENGLISH) SAYING: "Getting hit first is going to be the consumer group because they can make their decisions relatively quickly based on the current price. Think of going out to dinner or going out to a movie. The decision is much quicker than you could go over for months to do, or industrials. I think high end also, Tiffany and Coach they have 18, 19 percent in Japan. So they are going to see the impact very quickly on there." In terms of overall exposure: IBM leads the list- with close to $11 billion in sales to Japan- about 10 percent of its total. It's followed by drug company Abbott Labs- whose $7 billion in sales represents 19 percent of its total. Merck, Eli Lilly and Texas Instruments round out the top 5. Companies that sell big ticket items- like construction equipment maker Caterpillar- have a longer lead time. SOUNDBITE: HOWARD SILVERBLATT, SENIOR INDEX ANALYST, S&P DOW JONES INDICES (ENGLISH) SAYING: "Something like that where you have heavy machinery that takes a long time to do. So companies may go in and try to fix their costs against hedging to say, ok this product is going to cost me a million, to a million one, and that way they don't get caught on the wrong side having to produce something for a dollar and selling it for 90 cents. Again we've seen the yen go from 80 to 100. That's 25% if you had exposure there in the wrong direction, it's costing you a lot." Stephen Wood, chief market strategist at Russell Investments, is worried the devaluation trend could spread to other countries: SOUNDBITE: STEPHEN WOOD, CHIEF MARKET STRATEGIST, RUSSELL INVESTMENTS (ENGLISH) SAYING: "I think the knock-on effect could be very interesting to see, so how Japan devalues intentionally their yen. Then you are going to see competitive devaluation's now whether that is Korea, the rest of Southeast Asia, will this spill over in China? So this is going to create very interesting export oriented policies relative to currency in Asia. So right not it's yen specific but it could ripple through the rest of the region." And in the U.S., even domestic companies - especially those in electronics, autos and heavy equipment- could get hit- as Japanese products become less expensive for U.S. consumers.