Theme 4: Impact of political uncertainty, particularly with taxes
Politics both in the U.S. and internationally increased uncertainty. In the U.S., the election, a temporary resolution to the fiscal cliff, and increased payroll taxes left managements frustrated. In addition, concerns about the debt ceiling, sequestration, corporate tax reform and health care legislation are still hotly debated. Companies are cautiously optimistic about the leadership transition underway in China.
Tyson Foods, Inc. (NYSE:TSN)
…What we’re seeing coming into the year is that with the payroll tax increase, gasoline prices doing what they’re doing, there are consumers feeling these effects but they’re not eating less meat, they’re eating different meat now.
Alcoa Inc. (NYSE:AA)
However, there’s one uncertainty still there, which is the uncertainty around the U.S. budget and that potentially has an impact obviously on the defense spend.
The Coca-Cola Company (NYSE:KO)
We need to wait and evaluate the impact of the payroll taxes as well as the higher gasoline prices.
FedEx Corporation (NYSE:FDX)
And finally, I just want to emphasize that the calendar year 2013 outlook could swing either direction depending upon policy outcomes, especially with the fiscal cliff issues in the U.S. and certainly issues in Europe.
Starwood Hotels & Resorts Worldwide, Inc (NYSE:HOT)
In the U.S., uncertainty created by the presidential election followed by the fiscal cliff negotiations also caused businesses to adopt a wait-and-see attitude as we approached the end of the year.
Honeywell International Inc. (NYSE:HON)
…We’re cautiously optimistic, but it’s just too early to tell what direction the economy is going, and we’re all well too familiar with the issue. Big democracies around the world are still in gridlock over debt, and the U.S. is kicking the debt can down the road and finding that kick doesn’t quite go as far as it used to. All of these factors make forecasting what’s going to happen a real challenge.
AT&T Inc. (NYSE:T)
I think the biggest issues that could impact our industry and our company tend to be more macro policies in nature. Tax policy, for example – do we get a big budget deal done? And if we do get a big budget deal done, is there an appetite and an interest in doing tax reform? And we would obviously be very, very significant supporters of tax reform. We would really love to see the effective rate on profits come down, and understanding that that means some of the preferences like bonus depreciation may have to be compromised, but we think that’s a good thing. It’s good for our industry, and we think it’s healthy for the U.S. economy…other policy issues that are kind of an unknown that could affect the industry or us specifically are the Affordable Care Act, as those regulations are published, what kind of impact will that have, because that’s just a big uncertainty that we’re all waiting, trying to understand exactly how that’s going to affect all of us. And so the macro will be probably more important… and more relevant to us in 2013 than industry-specific issues.
BlackRock, Inc. (NYSE:BLK)
…Let’s hope Washington gets its act together and that we could have a sensible solution in terms of our deficits. And if we have that, we could have a very productive year in our markets. That is, in my mind, the biggest drag to our economy. The economy is not dragging by itself, but Washington is dragging our economy by inaction and, importantly, confusion.
Citigroup Inc. (NYSE:C)
So I think that what we would like to see now is how the U.S. deals with the ongoing debt ceiling debate and the upcoming sequester on expense reductions. We get through that and we see how the economy performs and we see whether or not those trends that we see now are sustainable, and then we’ve got decisions to make.
Constellation Brands, Inc. (NYSE:STZ)
The whys and wherefores of the slowdown are hard to know for sure. We pretty much think that it’s probably related to all of this fiscal cliff business, which impacted retail in general across all consumer goods. But that’s about the only thing that we can really say with respect to that.
Paychex, Inc. (NASDAQ:PAYX)
…We’ve seen gradual improvement, I think there was some improvement in the first couple of months of this FY and then it seemed to kind of stall again because of the election coming out, and – so, I think the new business formations we’ve talked a lot about, that really hasn’t recovered. I think then just businesses opening up those additional locations, adding employees, has kind of stagnated a little bit. It’s been pretty flat this quarter because of the election and then the fiscal cliff discussion and so forth. So, I would say, it’s not worse, it just hasn’t gotten a lot better.
The Southern Company (NYSE:SO)
The other thing is they could disappear with the hands of Congress at any time, right? We know that we’re in a revenue hungry Congress and how long can Congress afford to hand out preferential treatment to the renewables industry? So, there will be some taxadvantaged investing in the form of solar investments. I get that, but we really like building long-term books of business that we’ve done successfully in the past.
Thermo Fisher Scientific Inc. (NYSE:TMO)
So we’re already taking cost actions because of sequestration. So that is already embedded in our operating plan and our guidance. So that’s happening. It’s more if things get even more muted on the industrial side, would we take the incremental contingency plan. So that’s our base assumption on sequestration.
Verizon Communications Inc. (NYSE:VZ)
If we can get rid of some of the uncertainty around debt ceiling and deficit reduction and especially tax reform, I think this will open up for companies to start invest again.
