The Dow Jones Industrials (DJINDICES:^DJI) are closed for the Thanksgiving holiday. But with most international markets open, it's a good time to take a look at how foreign currencies have an impact on the Dow. Today, let's take a look at how much business the three newest Dow components, Visa (NYSE:V), Nike (NYSE:NKE), and Goldman Sachs (NYSE:GS), do overseas, and therefore how much exposure they have to potential moves in the value of the U.S. dollar.
Why currencies matter
With third-quarter earnings reports all in, one trend that hit several Dow companies this quarter was the negative impact of U.S. dollar strength on their overall results. To the extent that a company gets revenue abroad, the rate at which it can translate the foreign currency it receives into U.S. dollars has a big impact on its reported revenue and earnings. A weak dollar makes those foreign currency profits more valuable in dollar terms, while a strong dollar means getting fewer dollars for that currency.
For Visa, international expansion has become increasingly important to the credit card network giant's business. Overall, Visa gets 44% of its revenue from its international segment, and the amount of revenue it gets abroad has doubled over the past five years. Nevertheless, some investors remain concerned that rival MasterCard (NYSE:MA) has done an even better job of tapping the potential of overseas markets. Indeed, MasterCard gets more than 60% of its revenue outside the U.S., and it has seen especially quick growth over the past couple of years.
Nike's worldwide brand has had international appeal for decades, and its global customer base has been instrumental to the athletic apparel-maker's overall growth. Even though Nike has done an especially good job of keeping its domestic sales up recently, the company gets only 40% of its revenue from its U.S. division. The challenge the company faces is making its international business more profitable, as more than three-quarters of Nike's operating profit comes from its domestic operations.
As an icon of American capitalism, Goldman has extended its reach around the world, and its financial results reveal the extent of its success. The investment bank still gets about 60% of its revenue from the U.S., and tougher conditions in overseas capital markets have hurt its sales in Europe and Asia far more than they have closer to home. Nevertheless, the company sees plenty of growth opportunities outside the U.S., and investors have to hope that it can take maximum advantage of them, especially if domestic regulation keeps getting tighter.
The newest Dow members continue the trend towards substantial international presence. As a result, they all could see effects from the dollar's moves in the months and years to come.