Debt Ceiling Debacle Had Limited Impact On Q3 Earnings: Goldman Sachs

Debt Ceiling Debacle Had Limited Impact On Q3 Earnings: Goldman Sachs

With third quarter earnings rolling in, most companies are saying that the government shutdown and debt ceiling fight didn’t have much financial impact, though there are still concerns about ongoing political risk.

Debt Ceiling Debacle Had Limited Impact On Q3 Earnings: Goldman Sachs

Debt ceiling debate

“Both firms and consumers were concerned about the 16-day government shutdown, and the continued debt ceiling debate at the end of 3Q. Although some firms were affected by the government dysfunction, and many commented on the uncertainty of the political environment, the financial impact was less eventful than expected. Most firms have already looked past the issues, and expect fiscal resolution in 2014,” wrote Goldman Sachs analyst David J. Kostin.

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Companies that you would expect to be the most heavily impacted because of a lot of their revenues come from government contracts reported minimal harm and seem most interested in making sure that the next budget fight doesn’t also get out of hand.

Government shutdown effects on companies

“The contingency plans we activated during the Federal Government shutdown were successful in minimizing the impact on our daily operations. Nevertheless, we are hopeful that the FY2014 budget process will be resolved without further disruption,” wrote The Boeing Company (NYSE:BA). Honeywell International Inc. (NYSE:HON) agreed, saying “we think the prudent approach is to conservatively adjust our Aerospace sales outlook.”

International Business Machines Corp. (NYSE:IBM) pointed out that because a lot of its business with the Federal government was deemed essential, the shutdown was less harmful than it could have been.

Some companies mentioned that the indirect impact of the shutdown was greater than the direct impact because uncertainty affected consumer spending. “The government shutdown and last-minute brinkmanship created uncertainty in corporate America,” according to Starwood Hotels & Resorts Worldwide Inc (NYSE:HOT). “We were relieved that the impasse was resolved and it should not meaningfully affect the fourth quarter.”

No direct impact on American Express

According to American Express Company (NYSE:AXP), “we have not yet seen any direct impact on our business here at American Express, but we’re not immune from the broader economies in which we operate.”

Overall, the companies that Kostin cites view the debt ceiling fight as an embarrassment, some calling it a debacle or a circus, but don’t think it has done their companies any serious harm. The larger issue is preventing a political fight that goes so far that it damages the national economic recovery.

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