Why U.S. Companies Aren't So American Anymore

Foreign sales are the main thing keeping a lot of American companies healthy.

By SHARE

"Globalization" has become a dirty word.

Americans associate it with jobs being shipped overseas, falling wages and living standards, and the unsettling rise of China as a world power. But there are upsides to globalization too, even if they're less apparent. The cost of many consumer goods, for example—think most of the stuff at Wal-Mart—has stayed low or gone down in recent years, thanks largely to cheap imports from Asia and other low-cost manufacturing regions.

[See 11 corporate honchos who were rewarded after failing.]

Globalization has also been an enormous boon for some of the biggest names in corporate America, along with investors who own the stocks and even some of the people who work for those companies. Big U.S. firms—often called "multinationals," for good reason—have increasingly followed global growth, with about 40 percent of profit for firms listed in the S&P 500 stock index now coming from overseas. Foreign exposure allows U.S.-based companies to capitalize on rapid growth in emerging markets like China, India, and Latin America, and earn much stronger profits than if they were totally dependent on the struggling U.S. economy.

That's one reason the stock market has generally been strong over the last two years, despite lackluster growth in the big economies of the United States and Europe. "The S&P 500 is not U.S. GDP," says David Bianco, head of U.S. equity strategy for Bank of America Merrill Lynch. "The S&P 500 continues to outgrow the U.S. economy. Earnings power is decoupled from U.S. GDP." That decoupling is why he and many other analysts expect the S&P 500 to resume its upward momentum later this year, despite a slowdown in the U.S. and European economies.

It's true that some U.S. multinationals hire cheap foreign workers instead of Americans, and keep certain profits overseas to avoid paying U.S. taxes on them. But they also sell their goods and services in global markets that would be dominated by foreign competitors if the American firms weren't there. To explore the extent to which U.S. firms depend on foreign sales, I reviewed information supplied by data and analytics firm Capital IQ, showing foreign sales for all the S&P 500 firms that report such figures. The data show that for most big U.S. firms, foreign sales are a significant portion of total revenues, while firms with little or no foreign revenue are the exception. To highlight the importance of foreign sales, I used Capital IQ's data to provide snapshots of the leading U.S. firms in 15 industries. Here's how foreign sales contribute to overall revenue at 15 well-known American companies.

Wal-Mart. Total revenue: $420 billion. Portion from overseas: 26 percent. With humble roots in Arkansas, Wal-Mart began as a homespun American retailer. But it now operates nearly 5,000 stores in 14 foreign countries, including China, India, the U.K., and Latin America. Most of those stores operate under names other than Wal-Mart. Foreign penetration is one area where Wal-Mart maintains a competitive edge, since other big American retailers have a smaller overseas footprint, or none at all.

[See 5 reasons taxes are going to rise.]

Exxon-Mobil. $342 billion in revenue, 45 percent from overseas. Like other big oil companies, Exxon goes where the oil is and sells to customers throughout the globe. Exxon derives slightly more revenue from overseas operations than rivals like Chevron or ConocoPhillips.

General Electric. $149 billion in revenue, 54 percent from overseas. GE prides itself on its international footprint, although a few industrial firms, such as Caterpillar and 3M, earn an even larger portion of their revenue overseas. GE has sizeable operations in Europe, China, Russia, and India, along with a significant presence in Africa, the Middle East, and other parts of the developing world. Overseas operations include infrastructure development and investment activities led by GE's financial arm.

Bank of America. $134 billion in revenue, 20 percent from overseas. Conventional banking tends to be a domestic business, although big firms with an investment banking arm, like B of A's Merrill Lynch division, do business wherever their big corporate clients do. Europe is the biggest overseas region for Bank of America. Other financial firms have a stronger focus on China and India.

[See why gas and food prices are likely to drop.]

Ford. $129 billion in revenue, 51 percent from overseas. Foreign automakers sell a lot of cars in the United States, but U.S. carmakers are global, too. Ford, like General Motors, has a strong presence in Canada and Europe, while GM, through a joint venture, is one of the biggest carmakers in China—where its profits sometimes exceed those earned in the United States. Ford, meanwhile, has emerged as the strongest domestic automaker, which should help overseas sales.

McKesson. $112 billion in revenue, 9 percent from overseas. This big healthcare and pharmaceutical firm has mainly stayed in the United States, with relatively small interests in Mexico and Canada. With the exception of pharmaceutical companies, American healthcare firms tend to stay rooted at home, partly because the market here is so big, and partly because healthcare in many other countries is heavily regulated and dominated by government.

IBM. $100 billion in revenue, 64 percent from overseas. Like GE, IBM is another old-line firm that has grown roots throughout the globe and profited handsomely from globalization. IBM piggybacks on the global growth of its many corporate clients, while also pursuing new initiatives such as a big wireless-phone network in Africa. IBM aims to draw nearly 30 percent of its revenue from emerging markets by 2015.

[See 5 reasons to stop fearing China.]

UnitedHealth Group. $94 billion in revenue, none from overseas. Like other big health insurers, UnitedHealth does all of its business in the United States, where employer-paid healthcare represents a unique business model that's not easily exportable to other countries. That's one reason many jobs in healthcare are considered invulnerable to offshoring.

Boeing. $64 billion in revenue, 41 percent from overseas. Airlines in Europe, Asia, and the Middle East are important customers, but Boeing still sells the majority of its planes to airlines in the United States. Boeing would love to increase foreign sales, but Europe's Airbus poses tough competition, and now Chinese manufacturers are getting into the commercial airline business.

Dow Chemical. $54 billion in revenue, 67 percent from overseas. Dow is another big beneficiary of globalization, with most of its growth coming from exploding sales in overseas markets where demand for plastics, building materials, paint, and other Dow products is skyrocketing. By 2012, Dow hopes that 35 percent of revenue will come from emerging markets like China, eastern Europe, Latin America, and Africa.

[See where to work if you want a raise.]

Intel. $44 billion in revenue, 85 percent from overseas. Intel sells its chips and processors mainly to producers that build computers, which is why the company's biggest market is Taiwan, followed by China. The United States is third. Many of those chips sold overseas obviously make their way to the United States inside imported computers. Other companies that make technology components, such as Texas Instruments and AMD, earn a similar portion of revenue overseas.

Amazon. $34 billion in revenue, 45 percent from overseas. A lot of dot-com businesses take their time expanding overseas, since growth in the digital sector here in the United States is usually brisk enough to keep them busy. But Amazon has been around long enough to have set up robust operations in Canada, several European countries, Japan, and even China.

McDonald's. $24 billion in revenue, 66 percent from overseas. The fast-food chain might seem as American as 79-cent apple pie, but McDonald's earns the majority of its revenue from Europe and Asia. McDonald's learned long ago that it can't necessarily sell the same burgers and fries in foreign markets, which is why global operations focus on making sure foreign outlets fit into the local culture. At about 400 stores in China, McDonald's even delivers.

[In Pictures: How 15 U.S. Firms Depend on Foreign Sales.]

Nike. $21 billion in revenue, 50 percent from overseas. Sales in North America grew a healthy 13 percent last year, but in China they grew 16 percent—and in emerging markets, 19 percent. Americans may think of Nike as a ubiquitous sponsor of athletes in professional baseball, football, and basketball, but it also backs huge international events such as soccer's World Cup. Nike manufactures about one-third of its shoes in China, but also considers China one of its most important sources of sales growth in the future.

Marriott. $12 billion in revenue, 16 percent from overseas. The big hotel chain, which includes Marriott, Courtyard, Fairfield Inn, Residence Inn, and Ritz-Carlton properties, has a smaller overseas presence than other chains like Starwood and Wyndham. But it expects foreign sales to become a bigger part of its portfolio in the future. Of 700 hotels Marriott is developing, about 45 percent will be located outside North America. Their patrons will no doubt include a lot of American businesspeople scouting foreign markets.

Twitter: @rickjnewman