Slew of big firms say Obamacare hurting profits

(USA Today) Companies find all sorts of excuses during earnings season for disappointments, with the weather being an all-time favorite. But some companies are finding a new scapegoat: Obamacare.

Thirty companies in the Standard & Poor's 500, including United Parcel Service, General Electric and retailer Dollar General, have 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.

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.

Most of the companies talking about the law did so negatively, pointing out how it either hurts demand for their business or causes costs to increase. Consider a few examples:

* General Electric. The diversified manufacturer 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. GE's quarterly adjusted profit of 33 cents a share, though, beat Wall Street forecasts by 3%, 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%.

But it's not all negative. Paychex, a provider of payroll services mainly to smaller businesses, mentioned the Affordable Care Act as a possible "opportunity" for it going forward, despite causing some short-term delays in health-care related spending by its customers. Paychex sees that many smaller businesses will hire it to help them managed the requirements of the law. And WellPoint, the No. 2 health insurer, on April 30 said its business of providing a medical exchange under the Affordable Care Act was a sustainable venture.

And some companies see both positives and negatives. Insurance service provider Assurantcited the Affordable Care Act as a negative in that health care reform resulted in a $5.7 million increase to income taxes, since fewer costs are deductible, it says. But the same company said that act resulted in strong sales demand for its products, allowing the unit that sells health care services to post record revenue.


To find out more about Facebook commenting please read the
Conversation Guidelines and FAQs

Leave a Comment