Another two major U.S. companies blamed China for weaker earnings — construction machinery giant Caterpillar and chipmaker Nvidia — and their shares both plunged on Monday because of it.
Goldman Sachs had warned clients about companies with big international sales in a note on Friday, especially those with big revenues from China. It specifically warned about Nvidia ahead of the chipmaker’s surprise disclosure on Monday.
The other names on the list that gave Goldman pause were Broadcom, Micron Technology, Qualcomm, Qorvo, Skyworks Solutions and Wynn Resort. Those six, along with Nvidia, get more than half their sales from Greater China, according to the firm.
Shares of Nvidia tanked as much as 17 percent on Monday after the company lowered its revenue guidance for the fourth quarter citing “deteriorating macroeconomic conditions, particularly in China.” Caterpillar stock fell more than 9 percent on Monday after the company pointed to tariffs and a slowdown in China as major factors in its disappointing fourth-quarter results.
This has been a recurring theme in this earnings season that major companies sound alarms on the economic slowdown of the world’s second largest economy. Apple was the first to break the bad news when it lowered its revenue guidance by 8 percent on Jan. 2, blaming on the weaker demand in China. The country’s economic growth in 2018 cooled to its slowest in 28 years amid weakening domestic demand and punishing U.S. tariffs.
And so Goldman has been prepping clients to get ready and avoid stocks with big international exposure.
“Global tensions over trade policy and the economic relationship between U.S. and China will play a key role in the future relative performance of the baskets,” Goldman Sachs’ chief U.S. equity strategist David Kostin said in a note on Friday. The firm also noted the strong dollar as a risk to multinational companies.
For investors who want to hedge against international risks, Goldman Sachs put together a basket of companies focused on domestic sales.
Verizon, CVS, Charles Schwab and Intuit are among the companies with 100 percent of U.S. sales.
