The Effects of a Strong Dollar: Philip Morris International, Inc. (PM), Kellogg Company (K), McDonald’s Corporation (MCD)

All in all, foreign currency translation had a negative impact of $0.01 and $0.17, respectively, on McDonald’s Corporation (NYSE:MCD) diluted earnings per share for the quarter and year ended Dec. 31, 2012.

If the dollar’s strength continues, then I believe McDonald’s Corporation (NYSE:MCD) could see its net income continue to decline.

Kellogg Company (NYSE:K)

North America Europe Latin America Asia Pacific
2012 Sales $9,629 $2,527 $1,121 $1,010
2011 Sales $8,873 $2,334 $1,049 $942
FX Impact -4.50% -4.10% -2.80%
Total Change 8.50% 8.30% 6.80% 7.30%

Figures in millions. Total change includes the effects of acquisitions, disposals, and one-off items.

Like Philip Morris and McDonald’s, Kellogg Company (NYSE:K) has been hit hard by the rising dollar. Surprisingly, unlike the majority of companies operating within Europe, Kellogg Company (NYSE:K) European revenues grew 8.6% during 2012. Including the effects of one-off items, Kellogg Company (NYSE:K) European revenues grew by 12.7%. However, the weak euro removed 4.5% of this growth.

A similar situation is seen in Latin America, where the strong dollar removed 4.1% of Kellogg Company (NYSE:K) revenue growth. That said, the company did not suffer as much in Asia-Pacific, where the strong dollar only annulled 2.8% of growth.

So, overall, these three companies are all being strangled by the strong U.S. dollar. Indeed, in all three cases, the strong dollar is ruling out most of their revenue growth.

That said, it is not just the dollar that is causing these effects — the weak euro is causing chaos as well.

All in all, weak currencies around the world are damaging company revenues not just for these companies but for companies throughout the S&P 500. With the dollar continuing to strengthen, it could be time to reconsider investment strategies and look for companies with no international exposure and the resulting currency risks.

The article The Effects of a Strong Dollar originally appeared on

Fool contributor Rupert Hargreaves has no position in any stocks mentioned. The Motley Fool recommends and owns shares of McDonald’s. It also owns shares of Philip Morris.

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