After an enormous euro zone bailout last year, failure for the area to rid itself of economic stigma and high borrowing rates is causing many to ask whether the bailout was large enough to prevent default and contagion.
Some headline numbers being discussed for a new fund of financial support are up to 2-4 trillion euros, possibly by borrowing from the existing fund and leveraging. The question is: would it work?
Last May in the wake of a potential credit default from Greece, the euro zone member was given a 110 billion euro bailout jointly from the IMF and other members of the euro zone. When Greek interest rates did not improve and signs of contagion in other euro zone countries began to emerge, the EU set up a 750 billion euro bailout program with the IMF that included 440 billion euros in credit guarantees from the euro zone countries.
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned below. Analyst ratings sourced from Zacks Investment Research.
But questions have since been circulating whether the size of the bailout was large enough to shore up confidence in the markets. Interest rates for Greek, Italian, and Portuguese debt have remained severely elevated; several euro zone countries have since dealt with drastic credit ratings downgrades; and Greece has failed to meet certain deficit requirements of their bailout package. The global market continues to watch the euro zone daily.
Peter Boone and Simon Johnson (via the blog Baseline Scenario) provide some interesting insights. They note that although some expect that such a large bailout would “awe” the market into submission, and that the 4 trillion euro fund would not actually be used, they suggest this is implausible.
They argue that if Italian rates (for instance) fall to more normal levels, many private sector holders would quickly sell to lock in gains, requiring outflows from the euro zone members and the emergency fund to acquire significant amounts of Italian (and Spanish and Portuguese) debt. And Germany would not like having the fund be responsible for financing those countries’ continuing budget deficits.
Of course, they also say that Germany and others must agree in the first place to this strategy of “borrow and leverage” to expand the bailout fund, a large uncertainty by itself.
So, which U.S. companies stand to lose the most if the 4 trillion euro stability fund proves to be a fantasy?
For ideas, The Street has created a list of the top ten US stocks that derive a large portion of their revenue from European countries:
1. Edwards Life Sciences (EW, Earnings, Analysts, Financials): Edwards Lifesciences Corp. a leader in advanced cardiovascular disease treatments, is the number-one heart valve company in the world and the global leader in acute hemodynamic monitoring. Headquartered in Irvine, Calif. Revenue from Europe Segment: $139.5 million, or 34.5% of total revenue, according to Edwards Life Sciences’ latest earnings release. Overall, the company had $404.5 million in revenue during the first quarter
2. Paccar (PCAR, Earnings, Analysts, Financials): PACCAR Inc. is a global technology leader in the design, manufacture and customer support of high-quality light-, medium- and heavy-duty trucks under the Kenworth, Peterbilt, DAF and Foden nameplates. Revenue from Europe Segment: $1.18 billion, or 36% of total revenue, according to the company’s first-quarter earnings report. Overall, Paccar had sales of $3.28 billion in the first quarter
3. Dow Chemical (DOW, Earnings, Analysts, Financials): Dow Chemical Company is a science and technology company that provides innovative chemical, plastic and agricultural products and services to many essential consumer markets. Revenue from Europe Segment: $5.36 billion, or 36.4% of total revenue, came from Europe, Middle East and Africa, according to Dow’s first-quarter earnings report. Overall, Dow Chemical had revenue of $14.7 billion in the quarter
4. Pall (PLL, Earnings, Analysts, Financials): Pall Corporation is a leading supplier of fine filters, principally made by the Company using its proprietary filter media, and other fluid clarification and separations equipment for the removal of solid, liquid and gaseous contaminants from a wide variety of liquids and gases. Revenue from Europe Segment: $240.4 million, or 37.3% of total revenue, according to Pall’s fiscal second-quarter earnings release. Overall, Pall had revenue of $645.2 million in the quarter
5. Lexmark International (LXK, Earnings, Analysts, Financials): Lexmark International, Inc., together with its subsidiaries, engages in the development, manufacture, and supply of printing, imaging, document workflow, and content management solutions for offices in North and South America, Europe, the Middle East, Africa, Asia, the Pacific Rim, and the Caribbean. Revenue from Europe Segment: $389.5 million, or 37.7% of total revenue, came from Europe, Middle East and Africa, according to Lexmark’s first-quarter earnings release. Overall, Lexmark had revenue of $1.03 billion in the quarter
6. Philip Morris International (PM, Earnings, Analysts, Financials): Philip Morris International is the leading international tobacco company, with products sold in over 160 countries. They own 7 of the top 15 brands in the world and have a strong mix of international and local products that seek to appeal to a wide array of adult smokers. Revenue from Europe Segment: $6.41 billion, or 38.8% of total revenue, before considering excise taxes on the product, according to the company’s first-quarter earnings results. Overall, Philip Morris had $16.5 billion in sales during the quarter before excise taxes
7. McDonald’s (MCD, Earnings, Analysts, Financials): McDonald’s Corporation develops, operates, franchises and services a worldwide system of restaurants that prepare, assemble, package and sell a limited menu of value-priced foods. The company operates primarily in the quick-service hamburger restaurant business. Revenue from Europe Segment: $2.4 billion, or 39.9% of total revenue, according to McDonald’s first-quarter earnings report. Overall, the restaurant operator had revenue of $6.1 billion
8. Molson Coors (TAP, Earnings, Analysts, Financials): Molson Coors Brewing Company is world’s fifth-largest global brewer. The company has 15,000 employees worldwide, 18 breweries, and a broad portfolio of over 40 brands, including Molson Canadian, Coors Light and Carling. Revenue from Europe Segment: $274.7 million, or 41.1% of total revenue, came from the United Kingdom, according to Molson Coors’ first-quarter earnings release. The company reports sales in three segments: U.S., U.K. and Canada
9. Owens-Illinois (OI, Earnings, Analysts, Financials): The company produces glass containers for beer, ready-to-drink low alcohol refreshers, spirits, wine, food, tea, juice, and pharmaceuticals, as well as for soft drinks and other non-alcoholic beverages, including returnable/refillable glass containers. Its customers include the manufacturers and marketers of glass packaged products, such as brewers, wine vintners, distillers, and food producers. Revenue from Europe Segment: $698 million, or 41.3% of total revenue, according to Owens-Illinois’ first-quarter earnings release. Overall, the company had $1.72 billion in revenue during the quarter
10. Electronic Arts (ERTS, Earnings, Analysts, Financials): Electronic Arts Inc. operates in two principal business segments globally: EA Core business segment: creation, marketing and distribution of entertainment software and the EA.com business segment: creation, marketing and distribution of entertainment software which can be played or sold online. Revenue from Europe Segment: $507 million, or 46.5% of total revenue, according to EA’s latest earnings release. Overall, the company had $1.09 billion in revenue during the fiscal fourth quarter.
(By Alexander Crawford.)
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