Beside the point

25 April 2013 By Daniel Indiviglio

This earnings season, forced deficit reduction is filling a role previously held by the weather, China and other spurious scapegoats. Delta and IBM are among the culprits, but Washington-inflicted damage is trivial. Even so, lawmakers could all but end any financial disruption.

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As U.S. budget cuts go into effect, some corporations have begun citing the impact on their quarterly earnings. Companies like Lockheed Martin that have a heavy government exposure will see a more direct impact. But other companies have also said that the federal spending reductions are hurting their bottom line.
3M on April 25 became the latest of many U.S. companies to mention federal budget cuts as a reason for weaker earnings performance, saying the measures would affect its $1 billion in government sales. The company said it would work to offset losses with gains in market share.
Delta Air Lines told investors on April 23 it was seeing some impact from government cutbacks. Its ticketed revenue resulting from defense businesses were down 15 to 20 percent over the last 12 weeks, Delta President Ed Bastian said.
During its first-quarter results call on April 18, IBM said federal business declined by 13 percent and was a drag on performance.
The U.S. government on March 1 began implementing $1 trillion in budget cuts over a decade. Known as the sequester, the reductions mainly target discretionary spending and orders across-the-board cuts on non-exempt programs.

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