As the euro plunges to its weakest level against the dollar in over a year, spurred by Donald Trump’s presidential win, certain European companies may find themselves poised for windfall gains.
Trump's victory, combined with Republican control of Congress, has paved the way for a potential policy overhaul: higher tariffs, increased defense spending, and a reassessment of foreign aid, all of which are sending ripples through global markets.
In this shifting economic landscape, Bank of America has spotlighted a select group of European companies uniquely positioned to benefit from a stronger dollar. These firms offer European investors both a hedge against euro weakness and a buffer against the uncertainties of Trump-era policy shifts.
European winners in a strong dollar environment: Who benefits and why?
European companies that derive a significant portion of their revenue from the United States but maintain relatively low North American asset exposure tend to perform well when the dollar strengthens.
This revenue-asset imbalance allows these companies to enjoy a boost in revenue from North American sales while minimizing exposure to rising dollar-based costs on assets.
A stronger dollar inflates the value of US-generated revenues when converted back to euros, directly enhancing earnings for European companies with substantial North American sales.
This provides an earnings uplift without requiring adjustments to prices or production levels.
On the other hand, low US tangible asset exposure helps reduce operational cost risks tied to dollar appreciation. Companies with leaner operations in the United States can focus on benefiting from higher revenue without the burden of increased costs such as real estate, wages, or regulatory expenses which can erode profitability.
In contrast, companies with significant asset exposure in the United States face heightened sensitivity to dollar-based costs.
Bottom line, European companies with a more balanced or minimal asset footprint in the United States can sidestep these challenges, concentrating instead on reaping the rewards of higher dollar-denominated revenues.
Top 15 European companies benefiting from a stronger dollar
In a report published Thursday, Bank of America quant strategist Paulina Strzelinska screened a group of European companies positioned to benefit from dollar strength.
These companies, identified for their high revenue exposure in North America and minimal tangible assets in the region, are well-suited to capture the upside of currency gains without incurring significant dollar-based operational costs.
Key European beneficiaries from a stronger greenback
- Novo Nordisk: This Danish pharmaceutical giant tops the list with 59% of its revenue sourced from North America and no tangible assets there. The company is well-protected from dollar-based operational costs and stands to benefit from currency conversion gains.
- British American Tobacco: BAT secures second place with 44% of its sales in North America and no physical assets in the region, enabling it to capitalize on the strong dollar without dollar-denominated cost pressures.
- Ferrovial: The Spanish infrastructure firm derives 36% of its revenue from North America, with zero tangible assets in the region, making it highly sensitive to dollar gains without exposure to asset-related costs.
- Beiersdorf: Known for brands like Nivea, this German company generates 26% of its revenue in North America but has no physical assets in the United States.
- Kongsberg: The Norwegian defense and maritime technology firm earns 24% of its revenue from the US but only holds 3% of its assets there.