These Are the Public Companies Most at Risk as Shutdown Ticks Toward Record

(Bloomberg) -- Wall Street is starting to take President Donald Trump’sthreat to keep the government shuttered for "months or even years" over his proposed border wall more seriously.

With no end in sight for the partial U.S. government shutdown, analysts have begun scouring the depths of federal bureaucracy to identify the firms most jeopardized by a long-term deadlock. Washington’s budget impasse will become the longest in American history on Jan. 12, days after the president delivers a prime-time speech Tuesday and visits the border later this week.

Stocks like Macy’s Inc., Chipotle Mexican Grill Inc., Monro Inc., and Hyatt Hotels Corp. are some of the consumer-facing firms most exposed to the Washington, D.C., metro area, where federal workers will miss their first paychecks on Jan. 11, Jefferies analysts wrote in a note today.

While most analysts surveyed by Bloomberg believe the government will reopen soon, here are some of the possible consequences they’re watching for in an extended shutdown:

• Chuy’s, The Container Store, Nordstrom, Sonic Automotive, Marriott International and Steven Madden are among other consumer names exposed to the D.C. area, Jefferies wrote
• Traders should beware of small-cap stocks despite their strong performance so far during the shutdown, said Josh Wright, Chief Economist at iCIMS.
  • “I’ve got to think that some of them are overexposed to shutdown risk and cash flow issues, so I’d pick my spots carefully among them, rather than rush blindly into that asset class,” he told Bloomberg in an e-mail.
  • Wright also warned that middlemen for individual government contractor workers will lose a significant amount of revenue since contractors aren’t eligible to be paid for lost time.
• IT services providers like CACI International, Science Applications and Booz Allen Hamilton are the first to feel the impact from federal spending changes -- rather than contractors that provide things like submarines and planes, BI federal contracts analyst James Bach said in an interview.
  • “If the shutdown goes on much longer than the one we saw in 2013 than clearly that’s going to have a deeper impact on these companies,” he said. Bach sees little impact from a shorter shutdown.
  • Bach is also watching contract awards for slipping timelines, which could impact companies who have baked awards into their forecasts
    • "The vast majority of Booz Allen’s work is continuing as planned, as it is being conducted for U.S. government agencies already funded by Congress," Booz Allen said in an email to Bloomberg. The firm declined to comment on whether that funding could run out.
• Biofuel producers like Renewable Energy Group and Green Plains will ultimately benefit from an EPA proposal to reset statutory volumes under the Renewable Fuel Standard, but the shutdown could delay the process for months, Height Capital Markets wrote in a note
• Emergency funds for the Supplemental Nutrition Assistance Program (SNAP) are unlikely to cover even two-thirds of Feb. payments, Cowen senior policy analyst Chris Krueger wrote in a note; funding expires Feb. 1
  • Retailers selling consumables that are more exposed to low-income consumers may see a negative impact from any pause in SNAP benefit distributions. These companies may include Dollar Tree Inc., Dollar General Corp., Walmart Inc., Fred’s Inc., and United Natural Foods Inc., which acquired grocer SuperValu Inc. in Oct.

--With assistance from Felice Maranz, Janet Freund and Jeran Wittenstein.

To contact the reporter on this story: Drew Singer in New York at dsinger28@bloomberg.net

To contact the editors responsible for this story: Courtney Dentch at cdentch1@bloomberg.net, Scott Schnipper

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