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Winners & Losers from Trump's State of the Union Address

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The theme of President Donald Trump’s second annual State of the Union address was “choosing greatness,” per an official briefing delivered last Friday. During the longest such speech on record, Trump issued a clarion call for unity, decrying the “ridiculous partisan investigations” and the “politics of revenge.”

This divisive climate, he felt, has the potential to harm the “economic miracle” the United States is currently experiencing. Trump’s speech touched on several issues, but its implication for American businesses was significant.

Defense, energy and infrastructure are the key winners from this speech, with Trump making several references to these sectors. But his references to drug pricing meant there was trouble ahead for big pharma.

Trump also remained steadfast about his protectionist agenda, hinting that there may be trouble in store for tech and manufacturing companies.

Possible Losers

Big Pharma

There were two clear references to prohibitive drug pricing in Trump’s prepared speech. The President said most elected representatives have a number of issues in common, which include cutting “the price of healthcare and prescription drugs.”

Later in his speech, Trump said that it was “unacceptable that Americans pay vastly more than people in other countries for the exact same drugs.” Clearly, the likes of Merck (MRK - Free Report) and Pfizer (PFE - Free Report) will be far from pleased to hear this.

Last week, powerful Congress committees held hearings on the issue. And on Monday, the U.S. Senate Finance Committee invited seven major pharma firms for hearings on the same issue.

This includes the likes of Bristol-Myers Squibb (BMY - Free Report) , Johnson & Johnson (JNJ - Free Report) as well as Merck and Pfizer. Bristol-Myers has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Manufacturers, Tech Majors

Meanwhile, Trump stated that any trade deal with China would have to “include real, structural change.” There was more protectionist rhetoric on display, implying that there was trouble in store for manufacturers like Caterpillar CAT and GE (GE - Free Report) as well as for tech majors like Microsoft (MSFT - Free Report) and Apple (AAPL - Free Report) .

Likely Winners

Infrastructure

In keeping with the theme of unity, Trump said Democrats and Republicans “should be able to unite for a great rebuilding of America's crumbling infrastructure.” The President said that he knew Congress was eager to pass an infrastructure bill and promised his full support.

Trump has called for a $1.5 billion infrastructure spending program, details of which remain elusive so far. But this new call to action demonstrates his resolve to push the issue. This could be hugely beneficial for the likes of Vulcan Materials (VMC - Free Report) , Jacobs Engineering (JEC - Free Report) and Fluor Corp (FLR - Free Report) .

Defense

There were multiple references to defense and aerospace during the 90-minute speech. Most notable was the clear reference to higher spending on this count, amounting to “700 billion last year and $716 billion this year.”

Early in December, defense stocks soared following reports that Trump’s 2020 budget might allocate $750 billion to defense. Trump’s reiteration of his commitment to raising defense spending will benefit the likes of Lockheed Martin (LMT - Free Report) and Boeing (BA - Free Report) .

Energy

Trump also claimed that his administration has “unleashed a revolution in American energy.” Thanks to sustained efforts, the United States is now the world’s largest producer of oil and gas. And for the first time in 65 years, the country is a net exporter of energy.

During his first two years in office, Trump has rolled back several restrictive energy, climate and environmental regulations. A Democrat dominated House of Representatives will try and replace them over the next two years.

However, few expect any real progress since Congress remains divided and Republicans are skeptical about global warming. Under such circumstances, oil majors like ExxonMobil XOM and Chevron CVX can only thrive. 

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