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Highly International Northeast Companies Outperform More Domestic Counterparts

Stocks in this article: HBC

In the last six years, highly international Northeast based companies had robust average profit margins while companies in the same region with low levels of internationalization had considerably lower levels of profitability, according to a new report commissioned by HSBC Bank USA, N.A. (HSBC).

The report, ‘HSBC Spotlight on US Trade: Northeast’ shows the average profit margin in the Northeast for highly international companies was 7.7 percent over the period examined (2007-2012), while companies in the same region with low levels of internationalization were, on average, unprofitable during the same time.

The HSBC report analyzed the level of overseas sales and operations at top US publicly listed companies based in the Northeast and across the nation to understand the impact of international sales and operations on business profit margins by region and select sectors. Northeast companies with high levels of internationalization had the widest profit margin spread of all regions (10 percent), and double the average national profit margin spread of five percent. Companies by sector – consumer goods, healthcare, industrials and information and communication technologies (ICT) – also followed the trend.

“The findings underscore the impact a diversified geographic customer base can have on the profitability of a business,” said Paul Cronin, Executive Vice President, Northeast Corporate Banking for HSBC Commercial Banking in the US. “With sluggish domestic growth expected and increased global competition, more Northeast companies might want to consider global trade opportunities to grow.”

HSBC Bank USA, N.A. recently announced a $1 billion, 18-month dedicated loan program for small and medium size US businesses looking to export or expand internationally, to help companies find global growth opportunities and to further accelerate global business growth by US enterprises.

Not Just Higher, But More Stable

Highly international Northeastern companies also had a stable upward trend in their average profit margins, growing robustly from 2007 to 2009, before settling at an average profit margin of 9 percent in 2012. By contrast, profit margins for low-international companies in the Northeast were extremely volatile, swinging from high levels of unprofitability in 2007 to 2008 before climbing back to profitability in 2009 and reaching an average profit margin of 6.5 percent in 2012. Additionally, low-international companies in the Northeast never outperformed their more internationally oriented peers.

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