Do Tariff Refunds and a Strong Dollar Hurt Earnings?

The quiet EPS killers nobody budgets for

Look, earnings per share lives and dies on stuff most people never model in their pretty spreadsheets. Two culprits keep showing up this year: one-off tariff refunds and a dollar that’s a little too strong for comfort. Both can make margins look better or worse in ways that feel operational but aren’t. If you’re wondering why comps are messy in 2025, that’s a big reason. FX is still a headwind for multinationals, and the refund checks that helped last year don’t repeat on schedule. I’ve watched this movie since the early-2000s, and it keeps the same plot: temporary boosts look permanent right up until they vanish.

Here’s the thing: when companies recieve tariff refunds, think Section 301 exclusions catching up or duty drawback claims getting processed, it flows through cost of goods sold and inflates gross margin for a quarter or two. Then poof. No more. On the currency side, a stronger dollar slices translated overseas sales and, by extension, EPS. The math is not exotic. S&P Dow Jones Indices has shown for years that roughly 40% of S&P 500 revenue comes from outside the U.S. (S&P DJI, 2023). With that exposure, even modest USD moves bite. Sell-side models often use a rule of thumb: a 1% move in the trade-weighted dollar can shift S&P 500 EPS by around 0.5% (Goldman Sachs, 2024). Not gospel, but it’s a decent back-of-the-envelope. I’m still figuring this out myself because hedging programs muddy the picture, but directionally it holds.

Why it matters in 2025: comps are noisy. Earlier this year, several firms booked late-arriving tariff refunds related to prior periods. That made Q1 and sometimes Q2 gross margins look like “operational excellence.” It wasn’t. At the same time, the dollar stayed firmer than many planned for in January budgets, pressuring reported revenue and EPS. You can see the tell in guidance language. Multiple sectors, consumer staples, software with heavy EMEA mix, and parts of industrials, are guiding ex-FX again this year. When CFOs say, “ex-FX we’d be up mid-single digits,” that’s code for: the operations are fine, translation is the headache. And anyway, that’s helpful, but it also means you should strip FX and one-offs to see real cash generation.

What you’ll get in this section: we’re going to separate durable cash from accounting noise. We’ll point out how a one-time tariff refund can add 50-150 bps to gross margin for a quarter, only to reverse, and how a stubbornly strong dollar can knock 100-200 bps off operating margin for unhedged exporters. Actually, let me rephrase that: we’ll focus on practical checks you can do in 10 minutes, scan 10-Q footnotes for refund language, reconcile “ex-FX” guidance to reported numbers, and sanity-check segment margins that spike without a matching volume or price story.

Quick aside that I almost forgot, FX doesn’t just hit revenue translation. It also slips into cost lines through euro- or yen-denominated inputs. Then again, that cuts both ways. If costs and revenues are matched by currency, the net impact shrinks. Probably obvious, but I wanted to circle back and make that clear before we get into examples. So basically, if you want cleaner EPS, we need to normalize the noise and stick to the cash that’s likely to show up again next quarter.

Tariff refunds: where they hit the P&L and why comps bite back

Here’s the thing: tariff refunds don’t look like “other income” most of the time. They usually land in cost of goods sold (COGS) because duties are capitalized into inventory under U.S. GAAP (ASC 330), then expensed through COGS when the product sells. When an exclusion is granted or reinstated, the refund reverses prior duty expense. That shows up as a lower COGS line, which lifts gross margin. It feels like operational improvement, but it’s accounting clean-up. Actually, wait, let me clarify that, if the refund relates to inventory you already sold, it’s almost always a straight COGS credit (not a price/mix miracle). If it relates to inventory on hand, it can hit inventory first and flow to margin as those units sell.

Because many Section 301 exclusions were retroactive in prior cycles, refunds can bunch into a single quarter. We’ve seen quarters with 50-150 bps gross margin lifts tied largely to duty reversals, then… nothing the next quarter. That “one-timer” can juice EPS 3-8% for the print, then vanish. If I remember correctly, during the 2022-2023 reinstatement window for certain China exclusions (the List 3 and 4A carve-outs that had been paused and then brought back), a handful of import-heavy retailers called out triple-digit basis-point gross margin tailwinds in the refund quarter, followed by flat-to-down margins once the pipeline cleared. The year-over-year comp gets messy: Q2 looks heroic, Q3 looks like a step down, even if unit demand didn’t change at all.

Quick reality check on tariff math: the headline rates still matter. Section 301 rates have been 25% for Lists 1-3 and 7.5% for List 4A since early 2020. So a SKU that had a $100 landed cost with no tariff sits at $125 with a 25% duty. If you get a refund for a three-month period on, say, 30% of your mix, the blended COGS impact can easily swing 100 bps for that quarter. Honest truth, I wasn’t sure about this the first time I modeled it years ago, then I saw it hit the P&L exactly like that. Timing is the killer.

Why comps bite back: when exclusions expire, your gross margin can step down even if top-line demand is steady. The reversal is mechanical, COGS resets higher once you’re back to paying the duty. We’ve watched apparel and furniture names give back 70-200 bps of gross margin year-over-year when an exclusion rolled off, with no real change in promo cadence or freight. It’s not that the business “worsened”; it’s just that the duty line stopped being a tailwind.

Cash is a separate track. Recognition can precede cash. Refunds often show up in P&L before Treasury actually wires you the money. Watch working capital: “other receivables” or a dedicated “duties receivable” line can spike, then bleed down when cash arrives. 10-Q footnotes are your friend here, look for language on “Section 301 exclusion refunds,” “duty drawback,” or “tariff recoveries,” and a reconciliation of recognized refunds vs. cash recieved (yes, I still typo that). I think the cleanest tell is when gross margin jumps but operating cash flow lags, there’s your timing gap.

Import-heavy categories are the usual suspects: apparel (lots of List 3 exposure), consumer electronics (List 4A partials), and furniture (a magnet for 25% rates). The mix matters. A company that did the hard work to re-source to Vietnam, Mexico, or India will show less volatility; one that’s still China-heavy can swing. Anyway, the complexity is real, but the checks are simple:

• Scan gross margin vs. unit growth/ASP, if margin jumps without a volume/price story, think refunds.
• Read the 10-Q COGS and inventory footnotes for tariff refund language and timing.
• Match P&L recognition to cash: look for duties receivable and OCF lag.
• Map category exposure: apparel, electronics, furniture are high-risk for bunched refunds.

One last nuance, guidance. Companies sometimes guide “ex-tariff refunds” or they bury it in “non-recurring items.” If they don’t, build two tracks in your model: core gross margin and a separate line for tariff effects. It keeps you sane when comps swing. And yeah, I know this is messy; but in Q3 2025 with dollar strength still pressuring import costs on some inputs and exclusions rolling on/off, separating real margin from accounting noise is the difference between a beat that sticks and one that evaporates next quarter.

When the dollar flexes, multinationals flinch

Here’s the thing: FX hits earnings in two very different ways, and they get mixed up all the time. Translation is the simple math problem, foreign sales convert into fewer dollars when the USD is strong. If you sell €100 in France, at $1.20/€ that’s $120, but at $1.05/€ it’s $105. Same units, smaller reported revenue and usually a lower operating margin on a GAAP basis, even if the local business didn’t change. Transaction is the economic squeeze, your costs are in one currency and your prices in another. If you source in dollars and sell in euros or yen, a stronger dollar can widen or crush margin depending on the mix. I might be oversimplifying, but that’s the mental model I use on calls.

Why it matters in Q3 2025: the dollar’s been firm most of this year (rate differentials and a still-solid U.S. economy will do that), and management teams know the drill. Per S&P Dow Jones Indices’ Foreign Sales report (2023 edition), about 40% of S&P 500 sales came from outside the U.S. Tech, staples, industrials, and pharma are the big non-USD revenue buckets, S&P DJI’s sector breakouts showed consumer staples at ~64% foreign, info tech and health care both around the high-50s, and industrials in the mid-40s (2023 data). Translation: those sectors feel it most when the greenback runs.

On earnings sensitivity, the sell-side rule of thumb hasn’t changed much. Goldman Sachs estimated in 2024 that a 10% USD appreciation trims S&P 500 EPS by roughly 3-4%. It’s not a law of physics, but it’s a decent anchor when you’re pressure-testing models. And speaking of which, USD/JPY staying historically weak for the yen at points last year and this year means Japan-heavy exposures show the cleanest translation hit, while euro moves tend to be a slower grind. Honestly, I wasn’t sure about this either early in my career, I thought hedging would make it disappear. It doesn’t.

Hedging helps, but it rarely erases FX. Most companies layer on rolling forwards or options to smooth near-term cash flows. But hedge gains/losses often sit below operating income (other income/expense), so you get this awkward split: operating margin looks pressured from translation/transaction effects, then below-the-line hedge gains show up. That’s fine economically, but it can make year-over-year comps noisy, and it messes with screens that focus only on EBIT.

How I read it, step-by-step (and yeah, this is the same process I use at my desk when I’m half-caffeinated):

• Start with constant-currency disclosures, topline growth, gross margin, and EBIT in CC. That’s your “business health” snapshot.
• Reconcile to GAAP reported numbers. The gap is your FX drag (and occassionally pricing/elasticity showing up under the hood).
• Scan hedging policy/progress: what tenor, what % of the next 12 months covered, and where gains/losses hit. If I remember correctly, some staples cover 60-80% of the next 4 quarters.
• Check currency mix in 10-K: euro, yen, RMB, pound. Map it to this year’s FX moves and your own USD sensitivity rule-of-thumb.

Anyway, guidance. Many S&P names are keeping 2025 outlooks conservative on FX. They’ve been burned before, translation bites at the P&L just when volumes stabilize. You’ll hear phrases like “assumes FX is a modest headwind in 2H” or “low-single-digit revenue drag from currency.” I think that’s rational. With staples and pharma still getting more than half their sales abroad (per S&P DJI 2023), and tech hardware names living with USD-cost/EM-currency price mismatches, it’s safer to guide tight and let hedges and mix help later this year. Actually, let me rephrase that, conservative FX guide is management’s way of buying room for volatility. Investors should read CC first, then do the GAAP bridge. It’s boring, but it works.

Make your own ‘FX- and refund-neutral’ earnings view

Make your own “FX- and refund-neutral” earnings view

Here’s the thing: if you don’t strip out the odd stuff, you can end up paying a full multiple for earnings that won’t repeat. So, a quick, practical checklist you can actually use in a model, works for staples, pharma, hardware, you name it.

• Back out tariff-refund dollars from COGS to rebuild a clean gross margin base. Most Section 301 tariff refunds hit through cost of goods sold, which makes gross margin look great for a quarter or two and then, poof, it reverts. Pull the refund out of COGS and re-calc gross margin as if it never happened. If disclosure is vague, approximate: take “other income/expense” and any one-time duty line-items, scan the 10-Q footnotes, and reconcile to inventory step-ups. As a rule-of-thumb, I haircut reported gross margin by the refund dollars divided by the quarter’s revenue. I’ve seen this inflate gross margin by 50-150 bps when the checks hit, painful to miss if you don’t adjust. I know it’s tedious; do it anyway.
• Use management’s constant-currency (CC) growth where disclosed; if not, estimate it with regional mix. Start with CC revenue growth and rebuild FX translation on top. If CC isn’t given, use last year’s geographic sales mix and current-period average FX to proxy CC vs. reported. S&P Dow Jones Indices’ 2023 foreign revenue study shows the S&P 500 gets roughly ~40% of sales outside the U.S., with staples and pharma often above 50%. That’s your baseline for sensitivity. It won’t be perfect, but it’s better than pretending reported equals organic.
• Create a simple FX sensitivity. For a quick model: every 1% stronger USD versus your revenue-weighted currency basket reduces operating margin by X bps. Calibrate X company-by-company using: non-USD revenue share, gross margin, and percent of costs in local vs. USD. If you need an anchor, sell-side work from 2022 (Goldman Sachs published something similar that year) put a 10% USD move at roughly a 3% hit to S&P 500 EPS, so around 0.3% per 1% on earnings; translate that to bps on EBIT margin using your company’s margin level. Not perfect science, but directionally right.
• Separate recurring tariff savings from one-time refunds. If exclusions were reinstated and lower the go-forward duty rate, that’s recurring and deserves an operating multiple. The retroactive checks for prior periods are one-time. Different multiples, different trust level. I put the refunds in “non-core” and keep the recurring rate benefit in core, but with a probability haircut if policy risk is high. If management commingles both, that’s your cue to rebuild LTM and NTM margins clean.
• Normalize the tax rate. Refunds and FX change the geographic profit mix, which moves the effective tax rate. Back the refund out, recompute segment EBIT by region (roughly is fine), then re-apply a normalized ETR based on where profits actually sit. A 100-200 bps swing in ETR can add or subtract around 7% from quarterly EPS when margins are thin, don’t ignore it. Also, if hedges settle below the line, check whether they’re included in the non-GAAP tax bridge or not; I’ve seen both, oddly.

Look, this sounds like a lot, but once you build the template it’s a five-minute pass each quarter. And with the dollar still firm this year and management teams guiding cautiously on FX in 2H, you want your own CC view first, then do the GAAP bridge. Actually, let me rephrase that, start CC, sanity-check cash costs, and only then worry about the headline EPS print. This actually reminds me of my first buy side model where I forgot to remove a duty refund and, yeah, paid up for an extra 120 bps of gross margin that never came back. Anyway, don’t overreact to FX that can reverse, and don’t overpay for refunds that already cleared the bank.

What we’re hearing on calls this year

So, 2025 call tone is pretty consistent on two things: FX is back to being a low but annoying drag, and the refund party from last year is mostly over. Across consumer staples, discretionary, and a good chunk of multi-industrials, we’re hearing FX framed as a low-single-digit revenue headwind. Management shorthand is “1-3% on the top line, 20-50 bps on gross margin” when the dollar pops into quarter-end. A few Europe-tilted names are at the high end of that range when they’ve got 40-60% of sales in euros or pound sterling. When it’s Asia-heavy (think yen, won, RMB exposure), EPS translation gets dinged more noticeably, guides are calling out 2-4% hits to reported EPS when the dollar runs into the print. Honestly, I wasn’t sure about this either in April, but the Q2 transcripts kept repeating the same math.

The refund chatter? Way quieter than last year. In 2024, lots of importers had duty exclusions flow through COGS and gift them 50-150 bps of gross margin tailwind for a few quarters. This year, several are saying those benefits have lapped, and now they’re comping against those easy quarters. A bunch of teams literally said “tougher margin comps” and pointed to flat-to-down gross margin guides despite stable unit costs. Importers now talk about supplier re-sourcing and surcharges (temporary adders on POs to cover FX or logistics) rather than refunds. In other words, the 2024 exclusion waves faded, and the new playbook is price discipline plus cost recapture, not checks in the mail.

Guidance language is shifting, too. More companies are giving ranges ex-FX, sometimes a +/- 100 bps FX guardrail on revenue and operating margin, and then layering on a line about “pricing discipline” or “mix management” to offset currency. That’s a fancy way of saying they’re trying to hold price and push higher-margin SKUs to neutralize translation. I caught myself saying “translation” like a banker; I mean the mechanical conversion of overseas sales back into dollars that makes reported numbers look smaller when the dollar is strong.

What to watch sector-wise: consumer staples, beverages, and medtech are the most consistent about 1-2% FX top-line pressure and an EPS translation bite. Industrials with European order books keep highlighting euro weakness. Semis talk about FX less on demand but still pencil in a 1-2% revenue headwind when they report in dollars but sell in Asia. And retailers importing from Asia aren’t counting on refunds; they’re pushing vendor terms, shifting sourcing from higher-cost lanes, and adding small surcharges to protect margin.

One personal observation from the last two earnings weeks: more CFOs are proactively bridging “core” margin ex-FX and ex-refund lap. They know investors remember the 2024 benefit and don’t want confusion. I had a call where a mid-cap described a 120 bps gross margin headwind in Q3 from the refund lap alone, which matched their 2024 tailwind disclosure almost to the dime. Different company, same song.

Bottom line: with the dollar still firm this year, Europe- and Asia-heavy revenue mixes keep reported EPS under translation pressure. If guidance is ex-FX and the price/mix story sounds credible, great. But if management is vague on price hold or vendor recovery (and, yeah, some are), assume the low end of the range. And yes, we’re still seeing the same 1-3% FX drag show up, again and again, even if it sounds repetitive because, well, it is.

Portfolio moves that actually reduce the pain

So, here’s the thing: when FX keeps clipping reported EPS and those tariff refund laps turn from tailwind to headwind, you don’t need a hero trade. You need a simple mix that survives translation noise. The recurring stat from the last few quarters is still the tell, companies with Europe/Asia skew are eating a 1-3% FX drag on revenue, and some are layering on a very specific ~120 bps gross margin headwind from the 2024 refund lap this quarter. That’s not theory, that’s what teams are guiding to, and it keeps showing up. So position like you expect it.

• Tilt toward pricing power + local-cost/local-revenue alignment. If a company charges in euros and pays in euros, or sells in Japan and sources in Japan, you’ve got a natural hedge. Same if they can push mid-single-digit price and keep volume flat-ish. I screen for businesses where 70%+ of COGS is in the same currency as revenue in their top two regions, management won’t always say it cleanly, but regional COGS notes in the 10-K/20-F and supply chain slides usually give it away.
• Favor free-cash-flow converters over “beat on margin from refunds” stories. If 2024 refunds padded margins, 2025 comps hurt, basic math. I’d rather own names converting 90-110% of net income to FCF with low working-capital volatility than something that “beats” on a gross margin mix that just reverses when the refund laps. Honestly, I wasn’t sure about this either back when refunds started showing up in 2023-2024, but the unwind is behaving exactly like you’d expect.
• International? Consider currency-hedged ETFs. If you want foreign exposure without the USD headache, use hedged wrappers like iShares MSCI EAFE Hedged (HEFA), WisdomTree Europe Hedged (HEDJ), or Japan Hedged (DXJ). When the dollar is firm, hedged versions historically reduce the translation hit; when the dollar weakens later this year, if it does, you can always swap. The point is to decide if you’re making an equity bet or an FX bet, not both by accident.
• Options around FX-heavy reporters, selectively. Where implied volatility sits well below realized (say by 5-10 vol points) into earnings for companies with 40%+ non-USD revenue, I’ll occassionally buy short-dated put spreads or call spreads as a translation shock buffer. Actually, let me rephrase that: I use options when the vol is mispriced and the CFO’s FX bridge is thin, if they don’t provide a constant-currency revenue and gross margin walk, I assume the risk is to the downside.
• Screen for disclosure quality. This is underrated. Own the names that spell out: (a) constant-currency revenue growth, (b) COGS breakouts by region/input, (c) explicit tariff commentary, what rolled off, what’s embedded, what could be refunded again or not. If the deck and the 10-Q don’t match, I pass. If they reconcile the 1-3% FX drag clearly and tie price/mix to COGS, I’ll pay a small premium.

Anyway, the mix I like right now is simple: a core of steady FCF compounders with natural currency matching, a sleeve of hedged international for diversification, and a small tactical bucket where options pay for themselves around earnings gaps. You don’t need to over-engineer it, you know, sometimes the cleanest structure is the one you actually rebalance and stick with.

Rule of thumb I use: if constant-currency growth is 300-500 bps higher than reported and management won’t quantify the hedge ratios, I haircut guidance to the low end and size positions smaller.. but that’s just my take on it.

One more thing I was going to say about forward points and carry, but honestly the punchline is simple: decide if you want equity beta or FX beta. Keep the cash durable, let pricing power and disclosure do the heavy lifting, and save the cute stuff for a different market.

Bottom line: pay for repeatable cash, not refund-shaped EPS

Bottom line: pay for repeatable cash, not refund-shaped EPS. Here’s the thing, refunds make the quarter look prettier, but they don’t improve the engine. Treat tariff recoveries, retroactive credits, and one-off settlements as what they are: non-recurring boosts to optics, not to core profitability. I’ve seen too many models that annualize a rebate line and, surprise, the multiple looks cheap, until the next quarter when the “benefit” doesn’t show up and the stock retraces. Look, I get it, green numbers feel good. But green numbers that won’t repeat don’t deserve a full multiple.

For FX, don’t panic-price quality just because a strong dollar trims reported growth. The global sales mix hasn’t vanished. S&P Dow Jones Indices reported that about 40% of S&P 500 sales came from outside the U.S. in 2023, translation matters, but translation is cyclical. The dollar can bite near-term, but it cuts both ways over time. A rule-of-thumb that’s still useful: Goldman Sachs estimated back in 2015 that a 10% dollar appreciation can shave roughly 3-4% off S&P 500 EPS. Not gospel, but a decent anchor when you’re sanity-checking sensitivity. Earlier this year we saw the same pattern again, reported lines got dinged, constant-currency looked fine, quality franchises kept compounding cash flow.

Anyway, how to price it, so basically, separate the noise from the base. If refunds juice gross margin by 80-120 bps for a quarter because old invoices got re-rated, reset your margin deck to a clean, through-cycle level and model cash conversion off that. Then apply a sane multiple to what’s backed by cash, not to a headline EPS that’s carrying a refund tailwind. I literally print the cash flow statement occassionally and circle the transient stuff. Not high tech, but it works.

• Treat refunds as non-recurring, back out duty/tariff recoveries and retro credits when you set your multiple.
• Translate FX correctly, use constant-currency to gauge trajectory, but price in dollars; FX is cyclical and mean-reverting more often than not.
• Model a clean margin base, normalize mix, strip one-offs, and tie it to cash, not just GAAP EPS.
• Pay a fair multiple for durable FCF, not for optical beats that came from refunds or a favorable translation line.

Here’s a small data reminder I keep on a sticky note: in the S&P 500, foreign revenue was roughly 40% in 2023 (S&P DJI), so when the dollar swings, translation is going to move reported numbers, don’t confuse that with demand. And remember the old 2015 rule-of-thumb on USD sensitivity (10% up ≈ 3-4% EPS headwind) when calibrating what really changed. Actually, let me rephrase that, calibrate what changed and what’s likely to revert.

In 2025, the edge is recognizing what won’t repeat next quarter, then pricing it. Strong dollar this year? Fine, haircut reported, lean on constant currency, keep the good franchises. Refund lump this quarter? Great, say thank you and move on, don’t pay 18-20x for it. This actually reminds me of a portfolio review I did in July: two names with identical reported beats; the one with real volume/mix and clean cash conversion kept the gains, the one with refund-shaped EPS gave them back in a week. Different paths, same lesson.

Pay for repeatable cash. Discount the noise. Sleep better.

Frequently Asked Questions

Q: Should I worry about tariff refunds making 2025 margins look better than they really are?

A: Yes, treat them as one-offs, not new efficiency. Scan the 10-Q footnotes and MD&A for “tariff refunds,” “duty drawback,” or Section 301 language. If the credit hits COGS, back it out to estimate a clean gross margin run-rate. In your model, tag it as non-recurring and adjust comps so Q1-Q2 don’t overstate ongoing performance. Boring, but it saves you grief.

Q: How do I estimate the EPS hit from a stronger dollar on my multinational holdings this year?

A: Start with a simple shortcut: sell-side desks often use ~0.5% change in S&P 500 EPS for each 1% move in the trade-weighted dollar (Goldman Sachs, 2024). Then scale that by each company’s non-U.S. revenue share, S&P DJI showed about 40% ex-U.S. for the index in 2023. Check hedging disclosures: some firms have layered hedges that delay the impact. Use a sensitivity table (e.g., ±5% USD) on revenue translation and remeasurements. And, look, this year the dollar’s been firmer than many budgets assumed in January, so don’t be shy about trimming reported EPS a notch.

Q: What’s the difference between a tariff refund and real, sustainable COGS savings?

A: Tariff refunds are catch-up credits, think duty drawbacks or late Section 301 exclusions, that run through COGS once and then vanish. They’re timing quirks tied to prior imports, not proof your supply chain got smarter. Sustainable savings come from durable changes: vendor renegotiations, process improvements, mix shifts, automation. Accounting clue: refunds often show up as a discrete COGS credit or “favorable item,” while true savings show gradually across periods. Practical move: back out refunds to set a clean gross margin base, then judge whether procurement wins actually stick.

Q: Is it better to own companies that hedge FX aggressively or those with natural hedges?

A: So, both can work, but they help in different ways, and the details matter. Financial hedges (forwards/options) smooth reported results over the next 3-12 months, which is handy when the dollar stays stubbornly strong like it has this year. The trade-off is cost, complexity, and basis risk; if volumes or timing shift, you can get noise in other income or COGS. Natural hedges, making costs and revenues in the same currency, are cheaper and more durable, but they’re slower to build and rarely perfect. A U.S. brand selling in Europe with euro-denominated sourcing is in better shape than one importing all inputs in dollars.

Here’s how I judge it, you know, from too many earnings calls: 1) Disclosures, read 10-K/10-Q MD&A and Item 7A for hedge coverage %, tenor, and which line items are hedged. ADRs? Check the 20-F. 2) Duration, layered hedges covering the next 2-4 quarters reduce near-term EPS volatility. 3) Natural matching, where are factories, opex, and debt located vs revenue? 4) Pricing power, can they raise local prices to offset FX? Staples often can; low-ticket tech subscriptions occassionally lag.

Actionable: favor companies with clear FX policies, layered hedges (not hero bets), and genuine natural offsets. In models, haircut reported EPS when hedge protection rolls off, and add a small premium for firms with structural natural hedges. And ask IR a simple thing I always ask: what % of next-12-month foreign revenue is hedged, at what rates, and when do those hedges expire? If you can’t recieve a straight answer, I discount the quality of earnings, plain and simple.

@article{do-tariff-refunds-and-a-strong-dollar-hurt-earnings,
    title   = {Do Tariff Refunds and a Strong Dollar Hurt Earnings?},
    author  = {Beeri Sparks},
    year    = {2025},
    journal = {Bankpointe},
    url     = {https://bankpointe.com/articles/tariffs-strong-dollar-earnings/}
}