Third-Quarter Earnings Are Old News Already

BOSTON ( TheStreet) -- The dollar giveth and the dollar taketh away. Just ask big U.S. companies that rely on international sales.

With third-quarter earnings season under way yesterday, investors should keep an eye on large-cap multinational companies such as Procter & Gamble ( PG) and General Electric ( GE), and what executives reveal about business in the fourth quarter due to the strengthing U.S. dollar.

Many large U.S. companies that derive a substantial amount of revenue from abroad have enjoyed the benefits of a weaker dollar, which makes their products more competitive. Now, however, a stronger dollar may move against them, even as third-quarter financial results are seen beating analysts' expectations. Alcoa ( AA), a member of the Dow Jones Industrial Average, kicked off earnings season yesterday. The aluminum maker said earnings trailed analysts' estimates.

Third-quarter results likely will be "decent," says Paul Nolte, director of investments at Dearborn Partners, a Chicago-based investment firm with $3 billion in assets under management. But executives will have plenty to say about negative trends, particularly in the movement of the dollar, they're seeing that carried over from the end of the third quarter into the fourth.

"You need to focus not on what has happened but what companies are talking about going forward," Nolte says. "One of the headwinds will be the stronger dollar. We've had a stronger dollar over the last three months or so, and that could put the ding in some of the earnings of the very large multinationals. The commentary about the fourth quarter will be extremely important."

The euro trades at $1.36, down sharply from three months ago due to the debt crisis in Europe. In the past week, Goldman Sachs analysts became the latest firm to cut its year-end forecast for the euro to $1.38 per U.S. dollar, down from $1.40. Others are more bearish on the euro, with Bank of America/Merrill Lynch analysts calling for the euro to sink to $1.30 per dollar by the end of 2011. Capital Economics forecasts no letting up -- the firm expect the euro to drop to $1.10 by 2013, according to a report by the Associated Press.

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