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These Stocks Have High Exposure To Coronavirus Concerns

  • Companies like Nike and Estee Lauder derive nearly 20% of all revenue from China.
  • Hotel, casino chains, restaurants, among others are already impacted by the Coronavirus.
  • Investors could soon broaden their concerns from the very near-term to longer-term.

Analysts from Wall Street research firm Credit Suisse compiled a list of stocks that have the highest exposure to China. Many of these names were under close watch throughout 2019 given trade war-related concerns and are now back in the spotlight as the death toll from the Coronavirus rose to 80 in China.

Highest Exposure To China

Athletic apparel maker Nike and beauty company Estee Lauder both derive 17% of their annual revenue from the Chinese market, according to a research report obtained by CNBC. If the Coronavirus outbreak fails to slow down, each company can show a 3% to 5% drop in earnings per share next quarter.

Credit Suisse analyst Michael Binetti was quoted by CNBC as saying the financial impact to American companies from the current outbreak can’t be compared to the SARS outbreak in the early 2000s. China has evolved over nearly two decades to become a much larger market and the growth of Chinese consumers implies the country is a bigger contributor to global brands.

Other companies with large revenue exposure to China highlighted by the Credit Suisse report include luxury handbag maker Tapestry at 15% of revenue, apparel makers PVH and VF Corp at 7% and 6%, respectively.

Restriction In Travel

To help combat the spread of the Coronavirus, Chinese authorities implemented a travel ban across 15 cities. As such, hotel chains with a presence in China will be negatively impacted, the most notable of which include Marriott, Hilton, and Hyatt Hotels, analysts at Citi said in a similar note obtained by CNBC.

Nearby Macao properties are feeling an oversized impact given its gaming properties are very popular with Chinese visitors. Also, the outbreak coincides with the biggest travel period of the year, the Chinese New Year.

Some of the larger casino operators in the gambling paradise include Wynn Resorts, Las Vegas Sands, and MGM Resorts International. 

Restaurants

Finally, American restaurant brands are no stranger to China and a handful of names have already shut down some stores in the country as a precaution. Some of the notable names that have taken action so far include McDonald’s, Starbucks, and Yum China.

Guggenheim analyst Matthew DiFrisco was quoted by CNBC as saying in a research report that up to 15% of Starbucks’ entire operating income is derived from its operation in China.

It is unclear when restaurants can re-open which could prompt analysts and investors to broaden their concerns from the very near-term to longer-term.

About the author

Jayson Derrick
Jayson Derrick
Jayson Derrick has been writing professionally about stocks since 2011. He is particularly interested in alternative investments, hedge funds, and activist investing. He is a big fan of NHL hockey and lives in Montreal, Canada with his wife and four year old daughter.

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