Worries about the overseas business of US stocks under the trend of de-globalization - Seven questions about the overseas operation of US stocks

In the context of US tariff policies, discussions about global "de-dollarization" are growing more intense. This article portrays the landscape of overseas business for US-listed companies from the perspective of big corporations: 1. Big corporations have overseas business accounting for 30% of their operations, higher than small enterprises (20%). 2. The industries with the largest exposure to overseas business are technology (51%), materials (38%), healthcare (35%), and communication (34%), with technology and communication representing nearly half of the market value of the S&P 500; among these industries, communication has shown higher overseas business growth rates since 2017 than overall revenue growth rates, making it the most dependent industry on overseas business. 3. The proportion of overseas revenue for S&P 500 weighted stocks is generally higher than industry averages, and the profit margins of overseas business are also higher than domestic (e.g., in 2024, Apple's overseas revenue accounted for 57% with a profit margin of 42%, while the industry average was 51% and 32% respectively; Amazon's overseas revenue accounted for 39% with a profit margin of 17%, while the industry average was 27% and 11% respectively); indicating a high dependence of US giant companies on overseas operations. 4. Among S&P 500 companies disclosing their Chinese operations, the technology and communication industry (25%) has a higher proportion of revenue from China than the overall average (17%), but in the past 2 years, revenue from China has grown slower than the overall, especially with Nvidia showing a decrease in revenue proportion and slower revenue growth from China, which may be related to recent US regulations on the tech industry in China. Therefore, if tariffs lead to further de-dollarization, it could have a significant impact on US-listed companies' overseas business, and consequently on the performance of US stocks, especially weighted stocks. The main points of the report are as follows: How high is the proportion of overseas revenue for US-listed companies? 30%, with big corporations having a higher proportion than small enterprises Approximately 30% of the S&P 500 index is derived from non-US revenue; while smaller US enterprises (represented by the Russell 2000) have a relatively smaller proportion of non-US revenue, at about 20%. Which industries have the largest exposure to overseas revenue? Technology, materials, healthcare, communication Breaking down the proportion of non-US revenue for different industries in the S&P 500, it can be seen that the technology industry's non-US revenue accounts for over 50%, making it the industry with the largest exposure to overseas revenue; materials, healthcare, and communication industries have a non-US revenue proportion of over 30%. Technology and communication are the two largest industries by market value in the S&P 500 index, accounting for almost half of the total market value, and therefore the key industries among US-listed companies have a high dependence on overseas business. Are weighted stocks heavily reliant on overseas business? Over half have a higher proportion than industry averages Taking a more detailed look at individual stocks, the study respectively looks at the proportion of non-US business for the top 5 market cap companies in the major industries of the S&P 500. More than half of the leading companies in each industry have a higher proportion of overseas business than the industry average. In the technology industry, Apple (57%), Nvidia (56%), and But'one Information Corporation, Xi'an (75%) have a higher proportion of non-US business than the industry average (51%); In the communication industry, Alphabet (46%), Meta (56%), and Netflix (43%) have a proportion of non-US business higher than the industry average (34%), indicating that major players in the communication industry have a higher dependence on overseas business. In the healthcare industry, Johnson & Johnson (43%) and Abbott Pharmaceuticals (61%) have a proportion of non-US business higher than the industry average, and the proportion remains stable. Which market is more important, Eurasia or Europe? Almost equally important Overall, Asia and Europe account for 45% and 40% of non-US revenue, making them the most significant sources of overseas revenue. By industry, in the technology and energy industries, Asia accounts for 59% and 60% of revenue respectively, far surpassing Europe; while in the consumer staples, consumer discretionary, and financial industries, Europe accounts for 56%, 64%, and 65% of revenue respectively, far surpassing Asia. Is growth faster locally or overseas? Communication industry overseas revenue growth is faster Looking at the overall situation of non-US revenue from the S&P 500 companies that disclosed such information, it can be seen that non-US revenue growth from 2023 to 2024 was generally higher than total revenue growth, indicating that overall revenue growth is more dependent on overseas revenue. From an industry perspective, the communication industry has the highest reliance on overseas revenue, with non-US revenue growth consistently higher than total revenue growth (except for 2020); the materials industry saw non-US revenue growth outpacing total revenue growth in 2023-2024. Are overseas business profits higher? Some industries have higher profit margins than locally The profit margins of overseas business in consumer staples, consumer discretionary, materials, and technology industries are higher than domestic. By calculating the operating profit margin (operating profit/revenue) for overseas business in various industries, it can be seen that the average operating profit margins for overseas business in consumer staples, consumer discretionary, materials, and technology industries are 37%, 23%, 25%, and 33% respectively, all higher than the overall average operating profit margin (16%, 18%, 17%, 2% respectively).0%), that is, overseas business profit margin higher than domestic business.From the individual stock perspective, the overseas business profit margin of typical industry heavyweight stocks such as Apple (technology sector), Amazon (non-essential consumer goods), McDonald's (non-essential consumer goods), Coca-Cola (essential consumer goods), Walmart (essential consumer goods), and Linde Group (materials sector) is generally higher than in the US; that is, not only do these heavyweight companies have a higher proportion of overseas business, but the profit margin of their overseas business is also higher. Note: The proportion of companies in the essential consumer goods, non-essential consumer goods, materials, and technology sectors that disclose their overseas operating profit margin data (2024) accounts for 65%, 59%, 45%, and 22% of all companies that disclose overseas business data, respectively, with a certain degree of industry representativeness (relatively weak in the technology sector). Are US stocks highly dependent on Chinese operations? Relatively high in the technology and communication sectors Further filtering out S&P 500 listed companies that have disclosed Chinese business data, the proportion of operating revenue from China in the technology and communication sectors is higher than the overall average, indicating that the technology and communication sectors not only rely more on overseas markets, but also have a higher dependence on China. However, in terms of revenue growth, the technology and communication sectors have seen slower growth in revenue from China in the past two years compared to the overall average, possibly related to recent US regulations on the tech industry in China. From the perspective of individual stocks, looking at the situation of Chinese operations in the Mag7 component stocks, Tesla, Apple, and NVIDIA have disclosed Chinese business data from 2022-2023, with the revenue growth in China for these three companies mostly faster than the overall growth rate; however, in 2024, the revenue growth from China for all three companies was slower than the overall growth rate, with NVIDIA showing the most significant trend; at the same time, the proportion of revenue from China also declined. Looking at the situation of Chinese operations in the Mag7 component stocks, there was a slight decrease in revenue growth driven by Chinese operations in 2024. Note: Since only 28% of companies that disclose overseas business data also disclose Chinese business data, the representativeness of Chinese operations in the S&P 500 is not high, and can only objectively present the situation of companies that have disclosed Chinese business data. Risk Warning: Unexpected US-China trade and technology controls, errors in data statistics This article is excerpted from the WeChat public account "Yiyuzhong", authored by Zhang Yu and Yin Wenqing; GMTEight editor: Song Zhiying.