These U.S. stocks have the most on the line in Ukraine.
The Ukraine conflict has generated extreme volatility in financial markets around the world. The U.S. is one of a growing list of countries that have imposed sanctions on Russia in retaliation for its invasion of Ukraine. Russia’s economy is already responding, and the VanEck Russia ETF (ticker: RSX) — an exchange-traded fund with broad exposure to the Russian economy — is down more than 60% in the past month alone. The good news for U.S. investors is that most major U.S. stocks have relatively little business exposure to Russia and Ukraine. But that doesn’t mean there aren’t exceptions. Here are the top eight S&P 500 stocks that generate the highest percentage of total revenue from Russia and Ukraine, according to FactSet.
Philip Morris International Inc. (PM)
Philip Morris is the largest publicly traded tobacco company. It also generates about 8% of its total sales from Russia and Ukraine, more than any other S&P 500 stock. Shares of Philip Morris have performed relatively well in 2022, and the company has said the current sanctions will not have a material impact on business. Bank of America analyst Lisa Lewandowski estimates that Russia and Ukraine accounted for about 12% of Philip Morris’ total cigarette and heated tobacco unit volumes in 2021. Despite the risks, Bank of America has a “buy” rating and a $120 price target for PM stock, which closed at $101.07 on Feb. 28.
PepsiCo Inc. (PEP)
PepsiCo is one of the world’s largest beverage and snack food producers. PepsiCo’s global presence means it generates about 4.4% of total revenue in Russia and Ukraine. While the conflict may create ongoing uncertainty for PepsiCo’s business in the region, the company is in a strong position and reported 12% organic sales growth in the fourth quarter. Morningstar analyst Erin Lash says PepsiCo’s adjusted operating margins contracted by 1.8% in the fourth quarter, however, and investors should continue to monitor the ongoing impact inflation will have on PepsiCo’s profits. Morningstar has a “hold” rating and a $154 fair value estimate for PEP stock, which closed at $163.74 on Feb. 28.
Mohawk Industries Inc. (MHK)
Mohawk produces carpet and flooring products, including rugs, ceramic tile and laminate flooring. The company generates about 4.3% of total revenue from Russia and Ukraine. Bank of America analyst Rafe Jadrosich says Mohawk’s exposure to the conflict is larger than its revenue numbers suggest, given that the company is currently building additional ceramics production capacity in Russia. Jadrosich says strength in the U.S. dollar and weakness in the Russian ruble will also create foreign exchange headwinds for Mohawk, which generated about 45% of its sales outside of the U.S. in 2021. Bank of America has an “underperform” rating and a $135 price target for MHK stock, which closed at $140.78 on Feb. 28.
McDonald’s Corp. (MCD)
McDonald’s is the largest fast food restaurant in the world and has more than 36,000 restaurants in more than 100 countries. Not surprisingly, about 600 of those restaurants are in Russia, and Russia and Ukraine make up about 4.2% of McDonald’s total revenue. CFRA Research analyst Tuna Amobi says China was also a major source of international weakness for McDonald’s in the fourth quarter. But he says McDonald’s investments in mobile ordering and delivery services should continue to generate digital revenue growth for investors in the long term. CFRA has a “buy” rating and a $275 price target for MCD stock, which closed at $244.77 on Feb. 28.
EPAM Systems Inc. (EPAM)
EPAM Systems is a digital engineering and consulting platform that generates about 4% of its revenue from Russia and Ukraine. Bank of America analyst Jason Kupferberg downgraded EPAM stock from “buy” to “neutral” on Feb. 28 and cut his price target by more than 70% from $782 to $231. Kupferberg says Ukraine, Belarus and Russia represent a combined 58% of the company’s billable staff, and 24% of its staff is in Ukraine. He believes EPAM is moving Ukrainian employees to safety but says there is not enough information to get a clear picture of the financial impact of the invasion. EPAM shares closed at $207.75 on Feb. 28.
Carnival Corp. (CCL)
Carnival is the world’s largest cruise line operator. Carnival investors experienced a near worst-case scenario when the entire cruise industry was completely shut down for more than a year during the worst stages of the pandemic. Unfortunately, Carnival generates about 3.6% of its revenue from Russia and Ukraine, meaning investors might have a brand new headache. Morningstar analyst Jaime Katz says Carnival won’t return to full profitability until 2023, but the stock may be an attractive value investment at current levels. Morningstar has a “buy” rating and a $25.50 fair value estimate for CCL stock, which closed at $20.33 on Feb. 28.
PVH Corp. (PVH)
PVH is one of the world’s largest apparel companies and owner of popular brands Calvin Klein, Tommy Hilfiger and Heritage. PVH generates about 3.6% of its revenue from Russia and Ukraine. Morningstar analyst David Swartz says the share of PVH’s revenue generated outside of North America stands at about 70%. Swartz is bullish on PVH’s international expansion, but says Calvin Klein and Tommy Hilfiger have experienced brand weakness in the U.S. market in recent years. Morningstar has a “buy” rating and a $129 fair value estimate for PVH stock, which closed at $97.89 on Feb. 28.
Westinghouse Air Brake Technologies Corp. (WAB)
Westinghouse Air Brake Technologies provides equipment and services for freight rail and passenger transit vehicles. The company generates about 3.5% of its revenue from Russia and Ukraine. CFRA analyst Colin Scarola projects strong earnings growth for Westinghouse through 2023 as railroad capital spending recovers from recent cyclical lows. Reopening economies are driving Westinghouse volumes higher for now, but Scarola says he is concerned about the long-term outlook for freight revenues if developed economies continue to reduce their reliance on fossil fuels transported by Westinghouse customers. CFRA has a “hold” rating and a $100 price target for WAB stock, which closed at $92.82 on Feb. 28.
8 stocks exposed to the Russia-Ukraine conflict:
— Philip Morris International Inc. (PM)
— PepsiCo Inc. (PEP)
— Mohawk Industries Inc. (MHK)
— McDonald’s Corp. (MCD)
— EPAM Systems Inc. (EPAM)
— Carnival Corp. (CCL)
— PVH Corp. (PVH)
— Westinghouse Air Brake Technologies Corp. (WAB)
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8 Stocks Affected by Ukraine Conflict, Russia Sanctions originally appeared on usnews.com
