U.S. companies brave a Brexit world
The United Kingdom's vote to bail out on the European Union sent shock waves through global markets. But the actual blow hasn't been nearly the hit on U.S. companies many feared, and some firms are even benefiting.
Over the past two weeks, 14 companies in the Standard & Poor's 500 including technology firm Autodesk (ADSK), apparel maker PVH (PVH), HP (HPQ) and Estee Lauder (EL) have talked about the Brexit event, and few are all that concerned. Tiffany (TIF) even said it's helping its business. "We believe that the weakening of the pound has made London a more attractive tourist shopping destination," Mark Aaron, Tiffany's director of investor relations, told investors last week.
That's far from the impact global investors were bracing for when the vote passed back in June. More than $3 trillion in stock market value was wiped out in the two-day selloff after the June vote, which was the worst two-day paper loss in history, says S&P Dow Jones Indices. Since that time, U.S. stocks have rallied to new highs.The MSCI United Kingdom index is down 17% since the Brexit vote, but the MSCI Germany index is up 2.7% and the Brussels BEL 20 Index is up 1.5%
"Brexit, Schmexit," says Jason Pride, director of investment strategy at Glenmede in a note to clients. "The Eurozone economy seems quite healthy two months after the U.K.'s decision to leave the syndicate."
How the 'Brexit' vote could affect your portfolio
Some U.S. companies have capitalized on the Brexit panic. Autodesk, which makes software used by companies to design products, bought its company stock as it was beaten up in the selloff. "We also increased our stock buyback in Q2 to $170 million in light of the dip in the stock caused by the temporary panic around the Brexit vote," said CEO Carl Bass in an Aug. 25 call with investors. Shares of Autodesk cratered 14% in the two days following the Brexit vote, but are now up more than 35% from the panic lows.
PVH, the apparel maker behind brands like Tommy Hilfiger, Calvin Klein and IZOD, said the slowdown in its European business was "short-lived," CEO Emanuel Chirico told investors Aug. 25 in the earnings call, and now its growing in the "high single digits." "Our U.K. business continues to show strong momentum," he says. HP, a global technology company, said that Brexit "was really a nonevent," according to Catherine Lesjak, chief financial officer at HP in the Aug. 24 call with investors. "We saw a very, very limited impact from Brexit."
Investors know Brexit will be an event that will take months, if not years, to unfold. But there's optimism the diversity of global business will reduce any impact from a single country. "We operate in an unpredictable global environment and carefully monitor ongoing issues such as the ramification of Brexit on our business. We are aware that unforeseen challenges will arise," Estee Lauder's CEO Fabrizio Freda told investors Aug. 19. "However, we have comfort in knowing that we have many strengths that underpin our financial performance."
Brexit seems to be just another uncertainly for investors, and companies, to deal with. "I don't think (Brexit is) overblown," said William DeLaney, CEO of food distributor Sysco on Aug. 15 adding it could take two to three years to play out. "It's just too early to tell."
S&P 500 COMPANIES MENTION BREXIT
Companies that have discussed Brexit over the past two weeks
Date of mention, Company, symbol
8/25, Autodesk, ADSK
8/25, PVH, PVH
8/25, Signet Jewelers, SIG
8/25, Tiffany, TIF
8/24, HP, HPQ
8/19, Deere, DE
8/19, Estee Lauder, EL
8/19, Foot Locker, FL
8/17, NetApp, NTAP
8/17, Agilent Technologies, A
8/17, Cisco Systems, CSCO
8/16, Urban Outfitters, URBN
8/16, TJX, TJX
8/15, Sysco, SYY
Source: S&P Global Market Intelligence, USA TODAY