Mitigating Tariffs: 3 Stocks to Gain From a Weaker U.S. Dollar

Globe and Mail

28-04-2025

A falling U.S. dollar has been one of the fallouts from the Trump tariffs, as tracked by the Invesco DB US Dollar Index Bullish Fund (NYSEARCA: UUP), which has been trading down approximately 6.4% in 2025. The consequence of a weaker dollar is that U.S. products become cheaper for international buyers, which can increase the demand.
This is the opposite of a strong U.S. dollar, which causes international demand to fall. A weak U.S. dollar is not great for U.S. travelers as they have less buying power overseas, but it is favorable for tourists traveling to the U.S.
A weaker U.S. dollar is favorable for foreign consumers buying U.S. products and unfavorable for domestic consumers buying foreign products. With that understanding, here are three stocks in the retail/wholesale sector, the computer and technology sector, and the industrials sector that could benefit from a weaker U.S. dollar and help mitigate some of the tariff effects.
Before we go into individual stocks, it's important to remember a few principles.
Currency Headwinds Can Turn Into Currency Tailwinds With a Weaker U.S. Dollar
It's become common practice for companies with international exposure to reference 'currency headwinds' or the 'negative impact of foreign exchange (forex) headwinds' in their earnings reports. These terms highlight how fluctuations in exchange rates, particularly a stronger U.S. dollar, can erode overseas revenue and profits when converted back into dollars.
To provide investors with an alternate view, companies often report revenue and growth metrics in 'constant currency' or on a 'currency-neutral' basis. These non-GAAP measures strip out the effects of currency fluctuations, offering a hypothetical look at what growth might have looked like in a stable currency environment.
For instance, a company might report: 'XYZA recorded Q4 2024 revenue growth of 10% year-over-year (YoY) as reported, but 13% YoY in constant currency.' The constant currency figure is meant to illustrate the underlying business performance without the drag of a strong dollar, though it's important to remember that such adjustments are not standardized under GAAP and should be interpreted accordingly.
A Weaker U.S. Dollar Means Lower Margins But Higher Volumes for Sales Overseas
When you consider it, a weaker U.S. dollar means U.S. goods are sold cheaper overseas than before, which results in lower margins. However, since the products are sold cheaper, they should sell more of them since demand should rise. In essence, it becomes a quantity-over-quality trade-off where more sales are made but at lower margins.
Here are three stocks with the majority of their revenues generated overseas and the anticipated currency headwinds that could turn into tailwinds, which can mitigate some of the export or retaliatory tariffs.
Coca-Cola: An Iconic American Brand Derives Most of Its Revenues Overseas
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The Coca-Cola Co. (NYSE: KO) is synonymous with America and is considered the most recognizable brand in the world, with 94% global recognition. The company distributes over 3,500 products ranging from water, milk, and energy drinks to sodas throughout more than 200 countries, which is why it derives the majority of its revenues outside of the United States.
Coca-Cola mentioned currency headwinds many times throughout its earnings reports and conference calls. In fact, the company mentions how well it did despite 'double-digit currency headwinds' in its fourth quarter 2024 earnings report. This is directly due to the strong U.S. dollar. The good news is that a weaker U.S. dollar can be a currency tailwind, which should generate more demand for its products and drum up order volumes in the upcoming quarters. Keep a lookout for earnings reports that mention the negative impact of currency headwinds and foreign exchange, as they could turn out to be tailwinds in future quarters.
Coca-Cola Generates 63% of Its Revenues Overseas With 3% to 4% Forex Headwinds
For 2024, Coca-Cola generated a 3% YoY net revenue growth to $47.1 billion. Operating margin was 23.5% in 2024, up from 21% in 2023. When it comes to currency impacts on revenues, the largest came from Europe, Middle East & Africa (EMEA) with 16%, Latin America with 14% and Asia Pacific with 3%. Currency impacts on operating income were 16% for the EMEA, 18% for Latin America, and 6% for Asia Pacific.
For 2025, Coca-Cola expects non-GAAP organic revenue to grow 5% to 6%. For comp net revenue, Coca-Cola expects 3% to 4% current headwinds. Keep in mind that the U.S. dollar has fallen approximately 7% since the earnings release on Feb.11, 2025. The market is aware of this and surged KO stock to new all-time highs on Apr. 3, 2025.
Apple Generates 57.65% of Total Revenues Overseas With 2.5% Forex Headwinds
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Apple Inc. (NASDAQ: AAPL) reported its 'best quarter ever' for fiscal Q1 2025. The company generated 4% YoY growth to $124.3 billion in total revenues. Only 42.35% of total revenue was generated in the Americas ($52.65 billion), leaving 57.65% of total revenue ($71.65 billion) to be generated overseas. Sales in Greater China fell from $20.82 billion in FQ1 2024 to $18.51 billion in FQ1 2025.
China's Demand for Apple Products Shunned During Trade War With the United States
The trade war with the United States may cause sales to continue falling even while gaining a reciprocal tariff exception for Chinese imports of smartphones, computers and chips. However, the previous 20% tariffs are still in place, and an upcoming semiconductor tariff may boost tariffs despite the reciprocal tariff exemptions. The question will be whether a weaker U.S. dollar could drum up demand for Apple products in China.
In its FQ1 2025 conference call, CFO Kevin Parekh stated the currency impact for FQ2 2025, 'The color we're providing today assumes that the macroeconomic outlook doesn't worsen from what we're projecting today for the current quarter. As the dollar is strengthened significantly, we expect foreign exchange to be a headwind and to have a negative impact on revenue of about 2.5 percentage points on a year-over-year basis.'
Caterpillar Generates 49.2% of Total Revenues Overseas and Lower Demand
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While heavy construction and mining machinery manufacturer Caterpillar Inc. (NYSE: CAT) still generates most of its revenues ($8.236 billion) in North America, it generated 49.2% or $7.98 billion of Q4 2024 revenues overseas. Caterpillar has been suffering from declining YoY revenues and expects 2025 total revenues to fall below $64.8 billion.
No Specific Numbers Given on Currency Headwinds
In its 10-K filing, Caterpillar mentioned unfavorable currency impacts of the Brazilian real and the Japanese yen relative to a strong U.S. dollar. Full-year 2024 revenue declined by 3% YoY primarily due to lower sales volume and currency impacts, but the company didn't provide an actual percentage of the currency impact.
Incidentally, it experienced a favorable currency impact in Q4 2024 in its Resources Industries and Energy & Transportation segment and an unfavorable currency impact in its Construction segment, where most of the heavy machinery is sold.
A weaker U.S. dollar can increase Caterpillar's competitiveness overseas, spurring demand. Caterpillar forecasts slightly lower 2025 sales volume due to weaker end-market demand and high borrowing costs. However, a weaker U.S. dollar may help revive some demand.
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