As the euro weakens following Donald Trump's victory, a group of European firms with high US revenues and low asset exposure could benefit from a stronger dollar environment, Euronews reported.
With the euro falling to its weakest level against the dollar in more than a year, boosted by Trump's presidential election victory, some European companies may be in for a windfall.
Trump's victory, combined with Republican control of Congress, paved the way for a potential policy shift: higher tariffs, increased defense spending and a reassessment of foreign aid -- all of which are sending ripples through global markets.
In this changing economic landscape, Bank of America has turned its attention to a select group of European companies that are uniquely positioned to benefit from a stronger dollar. These firms offer European investors both a hedge against euro weakness and a buffer against the uncertainty of Trump-era political changes.
European winners in a strong dollar: Who wins and why?
European companies that derive a significant portion of their revenue from the United States but maintain relatively low exposure to North American assets tend to perform well when the dollar strengthens.
This revenue-to-asset imbalance allows these companies to benefit from increased North American sales revenue while minimizing exposure to rising dollar asset costs. A stronger dollar increases the value of revenues generated in the US when they are converted back into euros, which directly boosts the revenues of European companies with significant sales in North America. This provides an increase in revenue without requiring adjustments in prices or production levels.
On the other hand, the low exposure to US tangible assets helps to reduce risks related to operating expenses related to the appreciation of the dollar. Companies with more limited U.S. operations can focus on the benefits of higher revenue without incurring increased costs such as real estate, payroll or regulatory costs that can reduce profitability. In contrast, companies with significant exposure to US assets face increased sensitivity to dollar-based costs.
Ultimately, European companies with a more balanced or minimal US asset presence can avoid these challenges by focusing instead on reaping the benefits of higher dollar-denominated earnings.
Top 15 European companies benefiting from the stronger dollar
In a report published Thursday, Bank of America strategist Paulina Strelinska reviewed a group of European companies that could benefit from a strong dollar. These companies, identified for their high exposure to North American earnings and minimal tangible assets in the region, are well suited to capture the positive effects of currency gains without incurring significant dollar operating costs.
Major European beneficiaries of stronger greenback
1. Novo Nordisk: This Danish pharmaceutical giant tops the list with 59% of its revenue from North America and no tangible assets there. The company is well protected from dollar-based operating costs and can benefit from currency conversion gains.
2. British American Tobacco: BAT ranks second with 44% of its sales in North America and no physical assets in the region, allowing it to take advantage of the strong dollar without pressure on dollar-denominated costs.
3. Ferrovial: The Spanish infrastructure company generates 36% of its revenue in North America, with no tangible assets in the region, making it highly sensitive to the dollar's rise without exposure to asset-related costs.
4. Beiersdorf: This German company generates 26% of its revenue in North America, but has no tangible assets in the United States.
5. Kongsberg: The Norwegian defense and marine technology firm generates 24% of its revenue in the US, but only owns 3% of its assets there. I BGNES
