Obamacare’s Hurt on S&P 500 Companies
Thirty companies in the Standard & Poor’s 500, including United Parcel Service, General Electric and retailer Dollar General, mentioned the Affordable Care Act during their conference calls since March 1 and all through the first-quarter earnings season, says John Butters, analyst at financial data research firm FactSet. That’s a healthy cross section of companies if you consider that so far, 446 companies in the S&P 500 have reported first-quarter results.
Exactly half the companies that mentioned the Act are in the healthcare industry, where there’s a direct interaction with the new law. But in the other half, companies ranging from many industries discussed the fallout of the Affordable Care Act on their business.
■ General Electric. Blamed the Affordable Care Act for the “soft” performance of its healthcare unit. GE said hospitals and clinics were delaying equipment purchases due to the law. General Electric reported first-quarter revenue of $34.2 billion, just shy of the $34.4 billion expected by analysts, says S&P Capital IQ.
■ UPS. The shipping company cited changes in the healthcare laws, namely the Affordable Care Act, for driving up health-care costs for employees. To respond to the rising costs, UPS is moving its employees to a defined contribution health care plan, a change that will result in the company eventually booking a large one-time charge. UPS reported a quarterly profit of 98 cents a share, missing Wall Street forecasts by 9%, says S&P Capital IQ.
■ Dollar General. The discount retailer says the Affordable Care Act is causing its overhead costs to increase, causing a hit to earnings of between 2 and 3 cents a share. The company reported an adjusted quarterly profit of $1.01 a share, missing estimates by 1%, says S&P Capital IQ.
■ Cognizant. The technology outsourcing company blamed the Affordable Care Act for causing its revenue growth to slow to its lowest pace in years. The company offers business services like bill and call processing for healthcare providers. Many of these healthcare providers are offering health-care services to people who enroll in the new government health-care system, which was initially slow to take off. The company reported quarterly revenue of $2.4 billion, roughly in line with views. Quarterly profit, however, exceeded expectations by 5%.
This is just the beginning.