Shareholders in these 3 companies are cheering the Aussie dollar’s decline

It has been a dramatic few months for the once mighty Australian dollar (AUD), with the currency this week hitting a three-year low of 89 cents against the US dollar (USD). While the lower AUD isn’t great news for travellers setting off on overseas holidays, it is good news for Australian manufacturers and exporters whose goods and services are now more competitive. The lower AUD is also good news for companies earning foreign currencies — such as US dollars and Euros — through foreign operating units.


As the chart above shows, not since mid-April has the AUD been above $1.05 against the USD. Since then the currency has fallen 15% with some economists forecasting the AUD will continue to decline against the USD and reach 80 cents by the end of the year. The AUD has also fallen around 16% against the Euro.

The fall in the AUD could provide a significant boost to repatriated earnings for certain companies and it is interesting to see how the share prices of some of these potential beneficiaries have performed since the currency began trending downwards.

The chart below tracks the performance of Brambles (ASX: BXB), CSL (ASX: CSL) and QBE Insurance (ASX: QBE) since mid-April.  As one can see, these 3 USD-exposed companies have substantially outperformed the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO).


Source: Google Finance

With roughly half of Brambles revenue coming from the Americas region and another 35% coming from Europe, its exposure to the USD and the Euro is very high. CSL meanwhile earns approximately 38% of its revenue in the USA and at least a further 18% in Europe. In QBE’s case, the insurer generates over 41% of its revenues from North America and a further 26% from Europe. This large exposure perhaps explains the insurer’s particularly strong outperformance of the index.

Foolish takeaway

Shareholders in Brambles, CSL and QBE Insurance stand to be beneficiaries from the weakening domestic currency however much of that benefit is perhaps now reflected in the respective share prices. These are not the only companies which will benefit though. Investors who diligently seek out underfollowed companies with foreign earning could potentially still snare themselves a bargain.

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Motley Fool contributor Tim McArthur owns shares in QBE Insurance.

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