Not long after governments started shutting down in response to the COVID-19 pandemic, Congress passed the CARES Act in an attempt to ease the pain. That feels like a century ago. Many people have already spent the stimulus checks sent to them as part of the legislation, and the enhanced unemployment benefits expired at the end of July.
With more than 13 million people still unemployed, the majority of Americans favor a second round of stimulus checks. While acknowledging the desire to help struggling households, Republicans and Democrats have so far disagreed on how to proceed. However, there is new hope for an agreement that will include stimulus checks for American households -- a group of representatives known as the House Problem Solvers Caucus unveiled a $1.5 trillion bill on Sept. 15. The caucus is evenly divided between Democrats and Republicans, and they're trying to improve on previous proposals made along party lines that had little chance of reaching consensus.
If legislators can reach an agreement, here are two companies that will benefit significantly.
Most Americans are in favor of more stimulus checks. Image source: Getty Images.
People are relying on Amazon to help them avoid stores
At the onset of the pandemic, when people were most hesitant to leave their homes, they relied on Amazon (AMZN +0.61%) more than ever to deliver the essentials and non-essentials. Several months into the pandemic, many businesses are reopening, yet people are still going to Amazon for their shopping needs. As a result, the company's revenue rose by 40% in its most recent quarter to reach a whopping $88.9 billion.
To help meet the challenges the pandemic has caused for its business, Amazon spent $4 billion on COVID-19-related expenses in its most recent quarter. The spending was to make sure associates feel safe coming to work, and to ensure the company has enough personnel to handle the surge in orders.
Additionally, Amazon increased its capacity for grocery delivery by 160% in the quarter. That certainly helped fuel the 300% increase in grocery shopping. With so many restaurants still closed or at reduced occupancy for in-person dining, the surge in grocery shopping is likely to continue into the foreseeable future.
Tens of thousands of people are testing positive for the coronavirus daily, and Americans are still cautious about leaving their homes. If they suddenly have extra stimulus dollars in their pockets, Amazon is certainly going to experience an increase in sales.
Amazon reported $89 billion in sales in its most recent quarter. Image source: Getty Images.
Staying home more often means noticing things that need to be fixed
Home Depot (HD +0.89%) is benefiting from the fact that people are staying home more and therefore identifying new home improvement projects. In its most recent quarter, Home Depot reported revenue of $38.1 billion, an increase of 23.4% from the same time a year ago -- its largest quarter of growth since 2002.
Further, millions of people are now working from home. The change in working arrangements has created the need to upgrade existing spaces in the home to accommodate work needs. Some people are even deciding to add home offices. Whether upgrading an existing space or creating a new space, people are spending more on home improvement, and Home Depot is one of the prime beneficiaries of that trend. The surge in sales helped grow net earnings for Home Depot, which increased to $4.3 billion in its second quarter, compared to $3.5 billion in the same quarter a year ago.
Additionally, Home Depot is in the middle of an $11 billion multiyear investment to upgrade its capabilities. The program aims to improve the connection between what you see online and what you can get in its stores. Increasing the number of items available for purchase online and pickup in-store will help attract those customers who are trying to avoid going to physical stores but still wish to get the items they want quickly. Importantly for stockholders, this kind of transaction is more profitable for Home Depot than shipping an item.
If Americans are given checks from a new stimulus deal, you can bet that some portion of those funds will be spent at Home Depot, which will certainly please owners of this consumer goods stock.
Home Depot was allowed to stay open during lockdowns. Image source: Home Depot.
What is the likelihood of passage?
It's a good sign that the most recent proposal is bipartisan, but the environment in Washington is not ripe for agreement. Still, White House Chief of Staff Mark Meadows said earlier this week that he was more optimistic about a bill passing in the last 72 hours than he has been in the last 72 days.
While the bill does include spending on items that are important for members of both parties, the presidential election is coming up Nov. 3, and it remains to be seen if both sides are willing to agree on a bill before that date.
