The fiscal cliff has been described as a potential disaster for the finances of individuals and corporations alike. If Congress and the White House do not reach an agreement on the budget and tax rates, consumer spending will slow and hiring will freeze. While most companies will have their prospects badly crippled, many others will not feel pressure at all.
As the financial disaster at the end of the year approaches, it will be good to be Google Inc. (NASDAQ: GOOG) and nearly every other firm that offers its services for free, at least as far as the consumer can tell. Google’s ad revenue might be dented, but if consumer use of the service is not, the search company will be, for many marketers, an even more prized medium than it has been in the past. It allows messages to be targeted to potential customers with laser focus. Advertisers may abandon TV and even Internet display ads, which are less well targeted. But Google’s prospects should hold up.
Despite the fact that investors have turned their backs on Facebook Inc. (NASDAQ: FB), it has advantages similar to Google’s — cheap advertising that can be well focused.
Consumer products companies that produce cheap but widely needed products should do well, too. Procter & Gamble Co. (NYSE: PG) has been attacked because its margins have fallen. Some of that is due to commodities prices and some to management’s reluctance to cut costs. But toothpaste, soap and detergent sales should stay steady. Some consumers may turn to generic products, but P&G’s decades of marketing and branding ought to buttress its sales, even if Americans suffer financially. Colgate-Palmolive Co.’s (NYSE: CL) prospects seem about the same. Perhaps that is why each company’s shares are near 52-week highs.
Pfizer Inc. (NYSE: PFE) probably can be put on the list of firms that will do fine as the cliff approaches. It does sell some consumer products, the sales of which might fall. But demand for Celebrex, Chantix/Champix, Lipitor, Lyrica, Premarin, Pristiq and Viagra should not be hurt. Nor should the sales of drugs that treat even more serious diseases like cancer and heart disease. And Merck & Co. (NYSE: MRK) can be added to the same category based on its product mix.
Other than these, almost every other U.S. corporation is doomed.
Douglas A. McIntyre