The Computershare Limited (ASX: CPU) share price is down 2.6% to $14.27 today despite the company releasing no market sensitive news to investors.
Computershare is a company probably familiar to all share market investors due to its role as a global share market registrar. Its share price is probably falling due to pared back expectations as to the rate at which the U.S. Fed will raise cash lending rates.
The company invests a lot of its clients' cash balances in U.S. dollar denominated money market securities in order to earn a return. As at December 31 2016 it had close to US$16.6 billion to invest, so just minimal moves in risk free rates can have large impacts on profitability.
For the six-month period ending December 31 2016 the company posted operating income of $180.7 million, which was up 10.6% over the prior corresponding half.
Management is guiding to total earnings per share in financial year 2017 between 56 to 58 cents per share, which is marginally above last year's 55.1 cents per share. It also means the stock currently trades on 25x management's forecasts for earnings per share, with a trailing yield of 2.27%.
A weaker U.S. dollar is also a negative for Computershare as it will lower the firm's Australian dollar profitability and dividend payouts to Australian investors. Computershare is not the only popular business feeling the heat from the softening U.S. dollar, with the likes of QBE Insurance Group Ltd (ASX: CSL) and Amcor Limited (ASX: AMC) also falling this week.
