20 April 2024

Companies with Domestic Focus Deliver in First Quarter

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(Reuters) - U.S. stock investors are finding the value of staying close to home.

Even as the U.S. economy barely grew in early 2014, companies with a domestic orientation have on balance delivered better first-quarter sales and profit growth than their globally oriented peers.

RBC Capital Markets found that sales growth among companies with a high percentage of their revenue coming from the United States was three times stronger than those with a bigger international sales mix. Earnings growth was six times as robust. U.S.-focused names had bigger upside surprises on both the top and the bottom lines.

"With the U.S. economy vaulting energetically out of its winter cold spell but China looking even more beset by gravitational forces ... the two-speed developed market-vs-emerging market global recovery ... is growing more clear and present," analysts at Nomura wrote in a note to clients.

Companies with U.S.-oriented revenue rank among the year's leading advancers in the S&P 100 Index.

Anadarko Petroleum Corp, which gets more than three-fourths of its revenue from the U.S. market, is up nearly 27 percent in 2014. In its latest quarter, the company's revenue grew 50.1 percent, representing an upside surprise of almost 50 percent compared with expectations.

Utilities are 2014's runaway outperformers, with the S&P utilities index up nearly 11 percent. Utilities also have some of the highest U.S. revenue exposure. The stock of Exelon Corp is up 32.2 percent in 2014; in its latest quarter, Exelon posted revenue growth of 17 percent, good for an upside surprise of 28 percent relative to analysts' forecasts.

Power sector-focused funds have attracted inflows of almost $2 billion in 2014, according to Thomson Reuters' Lipper, though the sector is also favored as a defensive or dividend play, offering an average yield of 3.7 percent.

Conversely, technology companies have the highest percentage of foreign revenue exposure, according to Standard & Poor's. The group, which has sold off recently on concerns that valuations are stretched, has had outflows of $1.25 billion this quarter, according to Lipper.

Click here for the full article from Reuters.

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