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Companies Focus On Constant – Currency Metrics to Soothe Investors’ Nerves

October 24, 2022

The strong US dollar is trimming points off earnings but CFOs would prefer to highlight measures they control to investors. Companies are more frequently reporting in constant-currency figures to demonstrate the underlying business trend separately from impacts of foreign-currency, according to a recent article in WSJ’s CFO Journal. As currency impacts reach the highest levels in recent history, The Journal anticipates that more companies will follow suit. And, correspondingly, companies are looking to offset these impacts with modern hedging programs.

“It’s information to calm investors down,” said Wolfgang Koester, senior strategist at FX-service provider Kyriba, discussing constant-currency metrics. To report on a constant-currency basis, companies must have a full understanding of their exposure to foreign-exchange rates,” Mr. Koester said.

“Providing constant-currency figures helps Adobe show investors the underlying earnings power of the business. It also helps the company control how much money it devotes to hedges, which can offset the impact of currency swings but require capital and don’t fundamentally produce value for the company,” said Adobe’s Chief Financial Officer Dan Durn.

More U.S. companies are drawing investors’ attention to earnings figures that strip away the negative impact of foreign-currency rates as the strong dollar continues to pinch quarterly results.