By Alexandra Scaggs 
 

First-quarter earnings of U.S. companies are revealing a notable gap between sales and profits, leading some to point their fingers at the strength of the U.S. dollar as the culprit.

This earnings season, 56% of Standard & Poor's 500 companies reporting so far have missed their revenue projections for the first quarter. During the first three months of 2013, the ICE U.S. Dollar Index, which tracks the dollar's value against a basket of global currencies, logged a 4% gain.

Substantial gains in the dollar can cut into companies' revenues, because every unit of currency earned abroad will be worth less when reported in U.S. dollars. S&P Dow Jones Indices found that 46% of revenues came from abroad in 2011--the most recent year measured--for the 252 companies in the S&P 500 that reported sales by region.

Strategists differ over the dollar's precise impact.

Thomas Lee, U.S. equity strategist at J.P. Morgan Chase & Co., estimates that 40% to 45% of S&P 500 companies' total revenues are made outside the U.S. In a recent note, he said the dollar's strength could cut overall revenues in the S&P 500 by 2% to 3%.

However, Barry Knapp U.S. equity strategist with Barclays, says the likely impact of the stronger dollar has been to reduce revenues by 1%.

The stronger dollar has "had an effect, but only on the margin," said Mr. Knapp. "Coming into this year, I don't think any [analysts] would have built all this in" to their models, he added.

Among the companies taking a hit from the stronger dollar, 3M Co. (MMM) said in its earnings release that currency movements cut into its sales by 1.8%. The company also reduced its full-year outlook, citing the strength of the dollar alongside slowing demand. Its shares fell 2.5% Thursday, after it reported earnings.

"Considering the stronger U.S. dollar and softer demand in some end markets, it is prudent to alter our outlook a bit for 2013," 3M Chief Executive Inge Thulin said in its earnings release.

Companies that sell goods in Venezuela represent an extreme example of the dollar's toll on the bottom line.

Tupperware Brands Corp.'s (TUP) shares fell 4.1% after it released its earnings report. Tupperware cut its full-year earnings outlook, citing the 32% devaluation of the Venezuelan bolivar, as well as other currency effects.

Colgate-Palmolive Co. (CL) was more fortunate. It warned investors in February it would take a charge of $120 million because of the bolivar devaluation. But after its warning, analysts adjusted their estimates and the company ended up beating Wall Street forecasts for its first-quarter earnings and revenue, with shares rising 1.3%.

If reporting season continues as expected, companies will see sales decline 0.6% from the year-earlier quarter, compared with expectations for a 0.5% gain. While that may seem like big miss, using Mr. Knapp's estimate for the dollar's impact, which is on the conservative side, sales would be up 0.4% when adjusted for currency effects.

Analysts and strategists say it is tough to model for currency changes, because companies hedge their exposure with varying degrees of success.

As a result, many market watchers are looking past quarterly moves in currency and focusing on growth.

"I don't think investors are going to ding a company" for a currency miss, said Owen Fitzpatrick, chief equities strategist with Deutsche Bank Asset & Wealth Management, which manages roughly $1.2 trillion in assets globally.

Write to Alexandra Scaggs at alexandra.scaggs@dowjones.com

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