Shares of Chipotle Mexican Grill ( CMG) are down 21% year-to-date. Restaurant stocks including Chipotle and Darden Restaurants ( DRI) if Obamacare is repealed according to RBC Capital analyst Larry Miller. Restaurants the analysts cover say they expect additional health care to cut 1% to 2% from their margins beginning in 2014, with steeper effects for those that are 100% operated as opposed to franchises. These two stocks are most poised to benefit if Romney wins and Obamacare is repealed. "Darden is a labor-intense business; and as such, it is already testing operating with more part-time employees to skirt the new law. The effect on Chipotle's stock would be greater because any earnings compression would be magnified by its high multiple." Chipotle, of course, has been in the news after hedge fund manager David Einhorn revealed he was short the company,
Shares of Kansas City Southern ( KSU) are up 19% in 2012. Railroad companies are dependent on the coal industry as they make high margins from the transportation of coal. Under the current administration, the EPA has imposed "significant regulatory burdens" on coal-fired power plants, shutting them down based on emission and mercury rules, according to analyst John Barnes. Two Texas plants that account for 20% of Kansas City's Coal franchise are endangered and on the verge of shutdown. Under a Romney administration, there may be some pullback on the EPA rules that would buy these power plants more time to find a viable solution to meet the emission and mercury requirements. "This would be an immediate positive for the company because it would alleviate any near-term concern about coal-related revenue and contribution to profitability," Barnes wrote. 12 analysts rate the stock a buy, 8 a hold and 2 a sell or underperform rating, according to Thomson Reuters.
Shares of Amphenol ( APH) are up 36% in 2012. Amphenol is a designer, manufacturer and marketer of electrical, electronic and fiber optic connectors. The defense segment accounts for 12% of the company revenues but generates about 25% of its operating margin, according to the analyst. The segment has underperformed more recently due to uncertainty about the future of defense spending. "We believe a Romney win will likely be a positive for defense spending and hence for Amphenol's defense-centric revenues and earnings per share (12% and 20%, respectively)," analyst Amit Daryanani wrote. He expects that the removal of these overhangs would also allow the company to command a higher multiple in the market. Nine analysts rate the stock a buy or outperform, while five analysts maintain a hold rating. Two analysts have an underperform or sell rating on the stock.
Shares of General Dynamics ( GD) are up a modest 2% for the year. The company offers a broad portfolio of products and services in business aviation, combat vehicles, weapons systems and munitions, military and commercial shipbuilding, and communications and information technology. Around 70% of its revenues is generated by Department of Defense work, the analyst notes but it is its exposure to shipbuilding that makes it a againer from a Romney victory. "There are two large surface and sub-surface ship manufacturers left in the US (the other being Huntington Ingalls), and their yards would see increased volumes if Governor Romney is able to increase the annual ship buy from the planned nine to 10 per year to 15," the analyst wrote. "The exact mix within the Romney plan has not been revealed, but one aspired increase is a move from two to three Virginia-class submarines per year. These cost roughly $2 billion each, with nearly a five-year lead time." 13 analysts rate it a buy or outperform. Seven analysts have a neutral rating, while three analysts are negative on the stock.
Shares of energy company TransCanada ( TRP) are up 4% year-to-date. TransCanada's $5.3 billion Keystone XL Pipeline to link Western Canada and Bakken Oil production to the gulf coast is yet to be approved by the President. "A Romney win should result in a rally in the share price on the assumption that Keystone XL will receive its Presidential Permit in due course. We estimate that the stock could rally in the 5% range," analyst Robert Kwan wrote in a report. Conversely, the if Obama were to win, the uncertainty regarding the final decision will weigh on the stock. Only 5 out of 15 analyst currently rate the stock a buy or outperform, with 9 analysts maintaining a hold rating on the stock.
Shares of Anadarko Petroleum ( APC) have slid 7% in 2012. "For the oil & gas companies, we think there are several benefits to Romney winning the Presidential Election," Scott Hanold said. "Several initiatives could gain some traction including the prospects of opening up more drilling in the offshore and on federal land. In particular, Anadarko Petroleum (APC) should be poised to benefit because of its strong track record of success in the offshore provinces around the world, including the Gulf of Mexico where it produces 18-20% of its total volumes." Oasis Petroleum ( OAS) is another stock that could gain from a Romney win. As a 100% Bakken play, it will benefit from the Keystone approval, which will allow it to gain access to high margin markets. Analysts are overwhelmingly bullish on Anadarko, with only four out of 32 rating the stock a hold. There are no sell ratings on the stock.
Shares of General Motors ( GM) are down 26% year-to-date. General Motors was a beneficiary of the Obama Administration's bailout. But if Governor Romney becomes president, he has indicated that he would sell the government stake quickly, which is being seen as a potential catalyst for the stock. Still RBC believes that Treasury will sell its stake next year, "regardless of the election outcome." Instead, analyst Joseph Spak focuses on the "larger long-term effect" stemming from a Romney presidency -his opposition to recent Corporate Average Fuel Economy (CAFÉ) standards (54.5 mpg by 2025). " We believe these standards are achievable, but they will add thousands of dollars to the cost of a vehicle, which could stunt auto sales and weigh on automaker margins. Repealing current CAFÉ legislation could prove to be net positive for automakers," Spak wrote. The same applies for Ford ( F) as well. 17 analysts rate the stock a buy, 3 analysts rate it a hold and one analyst has an underperform rating on General Motors.
Shares of Cisco ( CSCO) are off by about 4% in 2012. Large tech companies such as Cisco are hoarding cash because of taxation policies that favor parking money abroad, according to analyst Mark Sue. "Cisco and other large-cap technology companies have amassed large cash hoards overseas throughout the years because foreign cash is not taxed until it is repatriated back to the US. Cisco currently has $48.7 billion in cash and investments ($9.10 per share) of which $42.5 billion ($7.94 per share) is held overseas." Companies have been lobbying Obama for a repatriation holiday similar to the one in 2004, where repatriated money was taxed at 5.25% instead of 35%. A Republican win could mean that we take a step towards the territorial tax system where foreign earnings are not taxed when returned to the U.S. A democratic win would mean a new tax plan to tax foreign earnings at between 20 % to 35%, according to the report. "For Cisco, we believe that investors are already discounting the value of the foreign cash balance due to the taxes associated with repatriation leading to a value of $6.32 per share in cash. A Republican win would mean a potential value of the cash of $9.10 per share, and a Democratic win would mean a value to the cash of between $7.51-6.32 per share, a difference of $1.59-2.78 per share higher with a Republican win." The analysts expect Cisco to gain as much as 15% in the event of a Republican victory. 28 analysts rate the stock a buy, 14 a hold, 3 a sell or underperform rating.
Shares of Bank of America ( BAC) and Citigroup ( C), up 75% and 42% year to date could gain further still from a Romney victory. While an Obama victory would mean status quo on financial regulation, which is mostly priced into stocks, A Romney win would be a positive catalyst for bank stocks as the regulatory regime under Republicans could be more friendy, Joe Morford and Gerard Cassidy write. Governor Romney has pledged to repeal the Dodd-Frank Bill and Republicans may look at scaling back the authority of the Consumer Financial Protection Bureau. A more favorable tone in Washington could ease litigation risks related to mortgage practices as well. "In our view, Bank of America and Citigroup are the ones that could benefit the most from a Romney win," the report said. "As two of the largest banks in the country, Bank of America and Citigroup have been among the more vilified companies by the press and politicians over the past several years. Meanwhile, since they are both major players across many different financial services businesses, they should be among the greater beneficiaries of any scaling back of the Dodd-Frank regulations and reforms." -- Written by Shanthi Bharatwaj in New York.