3 shares that could benefit from a falling Australian dollar

Ardent Leisure Group (ASX:AAD) is one company which could benefit from the recent rate cut. Two others could do likewise.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

When the Reserve Bank surprised the market and cut interest rates on Tuesday the Australian dollar took quite a tumble. In fact, the Australian dollar has now declined by 3.3% in total against the US dollar after steadily edging lower since the decision was made.

So far so good for the RBA which hinted many times in the past that the dollar was too strong for its liking and liable to strangle the country's economic transition.

As well as being good for the RBA, the weaker Australian dollar is good for a number of shares on the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO). I have picked out three which could receive a boost to earnings if the currency stays at this level or goes lower.

Ardent Leisure Group (ASX: AAD)

The company is perhaps best known as the owner and operator of brands such as Goodlife Health Clubs, AMF Bowling, and Dreamworld. But it also has a US-based family entertainment brand by the name of Main Event.

The Main Event segment grew revenue by a massive 48% year-over-year in Australian dollars during the first half of its fiscal year, meaning it now accounts for almost one third of the company's overall revenue. Management expects to open seven more Main Event centres by the end of its fiscal year, increasing total centres by 33% to a total of 28.

ARB Corporation Limited (ASX: ARB)

ARB is a designer, manufacturer, and distributor of high-quality four-wheel drive parts and light metal engineering works. Because there was a large number of new four-wheel drive vehicles released across the world last year, demand for its products is expected to ramp up this year.

US sales have been growing at a fantastic pace. Last year they grew by 37% year-over-year, meaning they now account for 12% of total sales compared to 9.5% a year earlier. Whilst this is still a small portion of overall sales, I expect there is room for a lot of growth in this huge market.

Treasury Wine Estates Ltd (ASX: TWE)

Treasury Wine's main market is the Americas market. This segment accounts for 42% of total sales and is growing at an incredibly strong rate. Its half year results showed segment growth of 22% from the same period last year.

But before we all get too excited it is worth pointing out that a large portion of this was due to currency tailwinds. On a constant currency basis sales would have been up by just 3% in the segment.

The company based these results on an Australian dollar being worth 73.5 US cents. So at present the currency at 74.5 US cents is actually going to be a headwind.

If the dollar doesn't drop below last year's level then the company will hope that its Asia segment will continue its great run and offset any declines. The Asia segment grew by a massive 123% to grow to being 14.5% of sales compared to 7.8% of sales last year in constant currency terms.

Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »