NEW YORK (Reuters) - Big U.S. multinationals riding high on revenue from overseas operations may find that wave is about to break.

Workers pack shoes at a Nike factory in Tangerang in West Java province, Indonesia, August 2, 2007. REUTERS/Crack Palinggi

For the past year, the stock market has rewarded those companies that have been able to offset subpar U.S. performance with stellar overseas profits. But recently, that has not been enough to keep investors happy.

Nike's NKE.N shares tumbled last week after reporting its quarterly earnings when investors focused on its U.S. weakness rather than strong international results by the world's largest shoe and apparel maker.

So why the shift in focus?

The multinational play was based on a combination of strong global growth and a weak U.S. dollar. But now with Europe slowing sharply, a cyclical economic slowdown in emerging markets and inflation rearing its head across the world economy, continued strong global demand is anything but certain.

“Disappointing guidance from U.S. multinationals regarding global earnings could be the next shoe to drop on the U.S. equity markets,” Joseph Quinlan, chief market strategist of global wealth and investment management at Bank of America, wrote in a note to clients.

“While there remains an investor bias toward large-cap U.S. equities, this asset class could be in for some difficult times ahead if the global economic slowdown ... gathers pace in the second half of this year,” he added.

Earnings estimates for the S&P 500 are already falling fast.

For the second quarter, analysts polled by Thomson Reuters now expect earnings to fall by 11.1 percent -- compared with expectations of a fall of 2 percent at the beginning of April. The biggest contributor to that drop in earnings expectations are financials and consumer discretionaries. But analysts are also beginning to scale back expectations for some of the sectors which have been doing relatively well.

Earnings growth expectations for industrial companies have been cut nearly in half -- to 5 percent from 9 percent, according to Thomson Reuters data. Technology sector profit growth estimates have slipped to 17 percent, from an April estimate of 18 percent growth.

While U.S. domestic profits declined 3 percent in 2007, overseas earnings rose 17 percent, making up the only real strength in corporate profits over the past year, said Bank of America’s Quinlan.

GLOBAL ECONOMY SLOWS

But that may be about to change. The global economy only expanded by a 3 percent annual rate in the first half of 2008 compared to a 5 percent rate a year ago, according to Bank of America.

U.S. foreign affiliate income, a proxy for global earnings, declined 4.5 percent year-over-year in the first quarter, the bank’s data showed.

This deceleration in growth will ultimately take some wind out of the sails for U.S. global earnings, Quinlan wrote.

This view is beginning to be echoed across U.S. equity markets. “International business trends may no longer provide an incremental benefit,” said Tobias Levkovich, Citigroup’s chief U.S. equity strategist.

“Weakening trends in Europe likely will weigh on profits earned abroad which had been a key area of strength over the last six to nine months, with clear problems also increasing in some developing countries, such as Turkey and Vietnam,” Levkovich said.

But that does not mean that one should throw the global earnings story out with the bathwater, said Subodh Kumar, chief investment strategist at Subodh Kumar & Associates.

The companies that have been benefiting from global earnings are often also bigger and “best in class” companies, and therefore more likely to weather economic storms than their smaller competitors.

Aside from Nike, package delivery services Federal Express FDX.N and United Parcel Service UPS.N -- both with hefty overseas exposure -- warned on profits due to soaring fuel prices. Many analysts expect more earnings revisions to come.

Citi’s Levkovich said earnings revisions look risky for capital goods and tech hardware & equipment, based on the view that capital expenditure trends are likely to slow.

Earnings estimates for areas within the industrial and technology sectors “look excessive,” he said.