What are we looking for?
Geographically diversified Canadian companies with minimal exposure to U.S. markets.
The screen
In the wake of Donald Trump’s re-election as U.S. president and his proposal for 10-per-cent global tariffs, many Canadian companies reliant on U.S. customers are bracing for impact. Tariffs are a policy tool used to protect domestic industries, often at the expense of international exporters. With Canadian exports to the United States exceeding $400-billion in 2022, Canada’s position as the U.S.’s top trading partner makes it particularly vulnerable to such tariffs.
Diversifying revenue exposure across different countries offers additional growth opportunities and reduced risk concentration in the Canadian market. Investors seeking geographic diversification in the face of potential tariffs on exports to the U.S. can target Canadian multinationals with limited U.S. exposure.
Using FactSet’s screening tool, I identified global Canadian stocks with minimal U.S. revenues by applying the following criteria:
· Traded on the S&P/TSX Composite
- Market capitalization greater than $1-billion
- Less than 10 per cent of revenue from the U.S., minimizing tariff impact
- More than 50 per cent of revenue from international markets, excluding the U.S.
The 10 remaining companies were ranked by their total revenue exposure outside of Canada.
What we found
Unsurprisingly, only one oil and gas company passed our screen. According to the Observatory of Economic Complexity, $117-billion of Canada’s $438-billion in exports in 2022 came from crude oil alone, as the U.S. is the top purchaser of Canadian energy exports. Most analysts believe energy producers are unlikely targets for new tariffs, but if this assumption proves false, they could face a substantial negative impact.
First Quantum Minerals Ltd. FM-T, a leading mineral exploration and production company, topped our screen with 97.1 per cent of its total sales coming from international markets excluding the U.S. Despite an 11.1-per-cent year-to-date total return, First Quantum’s stock price of $18.30 (as of Tuesday midday trading) remains well below its July, 2023, high of $39.10. This decline reflects the company’s continuing investments in ramping up operations and production, which have temporarily dented profitability metrics. However, research analysts expect a significant rebound in profitability in 2025 as new production comes online, forecasting earnings of 56 cents per share, surpassing 2023 levels.
Celestica Inc. CLS-T, a design, manufacturing, and supply chain products provider, is the only technology company that passed our screen, with 90.9 per cent of its sales coming from international markets. Celestica’s outlook is strong, driven by a 24-per-cent projected growth in sales and a 63-per-cent increase in earnings per share in 2024, largely fuelled by demand for its connectivity and cloud products segment. The company recently announced a partnership with Groq, an AI and machine-learning company, opening new growth opportunities aligned with long-term technology trends.
The information in this article is not investment advice. The author assumes no liability for any consequence relating directly or indirectly to any action or inaction taken based on the information contained above.
Arjun Deiva, CFA, is an MBA Candidate at the University of California, Berkeley, Haas School of Business.