Friday, April 20, 2001

Stock Focus: Rooting On The Euro

NEW YORK - From July to October 2000, the euro slid 14% against the dollar, falling from 96 cents to an all-time low of 83 cents. The impact on companies with significant exports to Europe wasn't pretty.

Take C.R. Bard (nyse: BCR - news - people), a manufacturer of medical supplies. In December 2000, the company complained that "dramatic declines in foreign currencies" had shaved $22 million from its fiscal 2000 sales. After the U.S., Europe is the company's largest market, accounting for 17% of revenue.

So far, 2001 hasn't proven much kinder to the euro. Against the dollar, the euro has fallen from a January high of 95 cents, to 89 cents. Actions by the European Central Bank haven't helped. On April 11, the ECB, citing the continuing need to keep inflation in check, announced that key ECB interest rates would remain unchanged. The euro dropped 0.6% on the news.

Despite all this bad news for the euro, some experts think the currency is set to rebound. "In the short run, until the ECB clarifies exactly what it's doing, the euro will be under pressure," says Subodh Kumar, chief investment strategist at CIBC World Markets, "But I still believe the best location for the euro is around par to the dollar."

Kumar predicts eurozone economies will expand between 2.5% and 3% this year. With that kind of growth--and eventual rate cuts by the ECB--he thinks the euro will approach parity with the dollar by the end of the year.

That scenario would benefit the companies in the medical devices sector, says Sandy Hollenhorst, senior medical technology analyst at Prudential Securities. Hollenhorst thinks a strengthening euro would add to the revenue of a company like C.R. Bard.

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