Interestingly, as in its September assessment, Moody's sees the prospect of a ratings benefit if the U.S. were to fall off the fiscal cliff.
For the defense, healthcare and oil and gas industries, Moody's sees the prospect of a negative impact from budget talks and the election of President Obama. Ratings analyst Russell Solomon said on Monday, that a win by Republican candidate Mitt Romney might have tempered defense budget cuts and asses that Obama's election could pressure the ratings of Lockheed Martin (LMT), Northrup Grumman (NOC), General Dynamics (GD), Raytheon (RAY) and Boeing (BA).
"President Barack Obama's victory over Mitt Romney in last Tuesday's US presidential election is credit negative for defense companies because the US remains the industry's biggest customer by far (with defense outlays accounting for 40%-45% of global military spending, roughly 5x the amount of China, which is the second-largest) and the Obama administration already has in motion a major shift in strategic priorities that will meaningfully pare spending," writes Solomon.Stephen Zaharuk and Michael Levesque of Moody's Healthcare coverage see Obama's re-election as reason to believe the key provisions of the Affordable Care Act -- otherwise known as 'Obamacare' - are likely to be implemented, with negative implications on the profitability and revenue of insurers. Pharmaceutical giants and medical device companies may also share in the pain as a result on greater regulation and restrictions on government supported spending. Still, Moody's sees a possible benefit to hospital operators like HCA (HCA), Community Health Systems (CHS) and Tenet Healthcare (THC), as a result of fewer uninsured emergency room visits that can create bad debts. In the oil and gas sector, Moody's expects the re-election of Obama to pressure industry ratings because tax reforms to industry giants may outweigh the eventual approval of the Keystone XL pipeline between the U.S. and Canada. "We think the Obama administration will approve the Keystone XL pipeline eventually, but tax reforms, if Congress agrees, could reshape much of the energy industry," write Moody's analysts. The agency also expects greater regulation on the hydraulic fracking industry and a focus on automotive fuel-efficiency as other potential post-election headwinds. Investors should look at Moody's Monday research notes and updated language surrounding the big fiscal matters of the day as reason to prepare for a widespread set of actions as lawmakers hammer out post-election policy. For more on the fiscal cliff, see why a housing recovery could blunt a partisan standoff . -- Written by Antoine Gara in New York
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