‘Uncertainty is not good for anyone’: America’s biggest companies are starting to reveal the impact of the government shutdown

Federal air traffic controller union members protest the partial government shutdown in Washington on January 10.

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Federal air traffic controller union members protest the partial government shutdown in Washington on January 10.
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REUTERS/Jonathan Ernst/File Photo

  • The US government shutdown entered into its 33rd day Wednesday.
  • While just 11% of S&P 500 companies had reported their quarterly results through Friday, we are starting to see the degree to which the shutdown has impacted their operations.
  • On Tuesday, RBC Capital Markets released a compilation of the notable commentary on the shutdown from this earnings season.
  • “So far, we’ve found that most companies (among those that have discussed it) have said that it has added to uncertainty in the macro environment / their outlooks,” equity strategists led by Lori Calvasina told clients.

Earnings season is still young, but corporations are beginning to shed light on the degree to which the partial US government shutdown has impacted their operations.

The current shutdown is unprecedented as the longest in US history, entering into its 33rd day Wednesday. On Thursday, the Senate is scheduled to vote on two competing proposals to reopen the government, but neither is expected to pass.

A newly released report from RBC Capital Markets equity strategists led by Lori Calvasina tracked comments made by S&P 500 companies on the shutdown. While a handful of the companies said they did not expect the shutdown to affect them, most that had commented on it said it had added an element of uncertainty to both their outlooks and the broader macroeconomic environment.

Read more: SHUTDOWN DAY 33: Federal courts say they’ll be crippled by next week; bills in Congress to reopen the government look dead on arrival

By the firm’s count, 11% of the S&P 500 has reported quarterly results through last Friday. Of those companies, 44 have made “no comment” regarding the shutdown, nine said the shutdown “adds to uncertainty / too soon to tell,” five described “no impact,” and just one said the business had already been impacted.

Still, Calvasina’s team is concerned about the shutdown’s potential impact on the broader market’s health.

“Up until Jan 22nd, we think it was fair to say that the tone on the trade war with China had been improving in early 2019,” the strategists said. “But fears about the impact of the government shutdown have been escalating, causing Policy generally to remain a headwind for the broader market.”

Here’s the full list of the “more interesting” shutdown commentary RBC Capital Markets has found so far this earnings season:


JPMorgan

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JP Morgan shares.
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Markets Insider

Ticker: JPM

Industry: Banks

Performance since shutdown began: +9%

“I would say, CapEx is sluggish on, fears around global growth. Government shutdown and trade are not particularly helpful. Uncertainty is not good for anyone. So there’s no doubt that as things continue, if there’s a level of anxiety and uncertainty, it’s just not constructive for confidence, and confidence begets stronger or less strong markets.”

Source: RBC Capital Markets


Delta

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Delta shares.
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Markets Insider

Ticker: DAL

Industry: Airlines

Performance since shutdown began: -4%

“Now with respect to the government shutdown, we are seeing some pressure on our business. On the revenue front, we’re experiencing about $25 million per month in lower government travel. The bigger impact is on our operations. With nonessential work at the FAA shutdown, our Airbus 220 start date is likely to be pushed back due to delays in the certification process. This is also hampering our ability to put 7 other new aircraft deliveries into service, but it’s our customers who are seeing the biggest impact with longer lines at airport security.”

Source: RBC Capital Markets


IHS Markit

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IHS Markit shares.
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Markets Insider

Ticker: INFO

Industry: Business services

Performance since shutdown began: +11%

In response to a question about the shutdown and the direct exposure to federal government revenues: “The biggest area would be product design, where we have – provide service to the Army, Navy. Typically, the contracting process is a continuing resolution process. So ultimately, the funding does need to come in, but there’s a continuation of services and ability to recover the full revenue, assuming that, ultimately, we do get funded.”

Source: RBC Capital Markets


Lennar

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Lennar shares.
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Markets Insider

Ticker: LEN

Industry: Residential construction

Performance since shutdown began: +12%

“First, simply on the government shutdown, we’ve not seen any impact from that to the market in the D.C. area.”

Source: RBC Capital Markets


Bank of America

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Bank of America shares.
source
Markets Insider

Ticker: BAC

Industry: Banks

Performance since shutdown began: +24%

“Trade wars, government shutdown, China slowdown, EU slowdown, Brexit, you name it, both here and abroad, impact people’s economic growth outlook. We are mindful of those potential impacts, but we see in the US strong indications of continued growth due to the benisons we have here in our economy. So given the slowdown predicted, does not enervate us, it invigorates us.”

Source: RBC Capital Markets


PNC Financial

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PNC Financial
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Markets Insider

Ticker: PNC

Industry: Banks

Performance since shutdown began: +11%

“Both services and manufacturing is in the surveys — remain at expansionary levels, although admittedly off the recent highs and our corporate clients, as we talk to them, remain largely bullish. Of course, all of this could change if, for example, the government shutdown persists for a longer period of time or disagreements with China on trade aren’t sorted out and the impact currently being felt by large multinational starts to trickle down to the broader economy. We don’t think that’s going to be the case.”

Source: RBC Capital Markets


United

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United shares.
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Markets Insider

Ticker: UAL

Industry: Airlines

Performance since shutdown began: +2%

“Overall, we do not think anything fundamental has changed as we look at the demand environment. That being said, the government shutdown and other factors have created some uncertainty in our Q1 outlook, and as such, we’ve guided to a 3-point range in [each] revenue this quarter.”

Source: RBC Capital Markets


BB&T

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BB&T shares.
source
Markets Insider

Ticker: BBT

Industry: Banks

Performance since shutdown began: +16%

“Optimism is still high. There’s certainly a lot of chatter about the government shutdown, Brexit, trade talk, all of that, if continued at a high rate over time, could impact the real economy. But so far, on Main Street, we don’t see that. You can tell from our loan performance that we had a very strong quarter.”

Source: RBC Capital Markets


Kinder Morgan

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Kinder Morgan shares.
source
Markets Insider

Ticker: KMI

Industry: Oil and gas

Performance since shutdown began: +11%

“It’s not having much of an impact on us at this point.”

Source: RBC Capital Markets


KeyCorp

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KeyCorp shares.
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Markets Insider

Ticker: KEY

Industry: Banks

Performance since shutdown began: +18%

“At this point in time, we are not seeing the impacts broadly in our markets, but we have done a variety of measures to be able to make sure that we can both reactively and proactively support customers of ours who are impacted directly by the partial government shutdown. And we have targeted programs for a special assistance for those who have various types of loans with us.”

Source: RBC Capital Markets


Comerica

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Comerica shares.
source
Markets Insider

Ticker: CMA

Industry: Banks

Performance since shutdown began: +24%

“We’ve been very focused on new client acquisition, which was up about 40% for us for the year in terms of new production. So we think that maybe – I think that we’ve been working on our positioning as well for growth. Having said that, I would say that we’ve got the same caution that we would have on prior calls around the overall economic and political backdrop that’s going on right now, and that customers’ sentiment still remains somewhat mixed around tariffs and government shutdown, labor constraints, et cetera.”

Source: RBC Capital Markets


Wells Fargo

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Wells Fargo shares.
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Markets Insider

Ticker: WFC

Industry: Banks

Performance since shutdown began: +10%

“And most recently, we are supporting customers who are affected by the ongoing government shutdown through fee reversals and other assistance to those who are having difficulties making loan payments.”

Source: RBC Capital Markets


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