The impact on earnings isn't always negative, as in HON's case, as they may be able to change accounting treatment and lessen the impact on net profit. But they can't change the impact on cashflow. Less cashflow, less balance sheet cash, or more debt are the only real ways for a company to bring their pension plan up to snuff. None of which are positive for the cautious investor.
While the stock market's rebound is beneficial to pension funding, the bond component of pension assets remains dismal. Plan assumptions have been too optimistic, for too long and companies are addressing the issue. But the timing is far from perfect.
Not only are we in a global slowdown, commodity input prices are raging. Any company that makes a product is facing significant pressure on margins. Now, after several years of poor performance in equities and low bond yields, companies are needing to start a more aggressive refunding of their defined benefit pension plans. Unfortunately it is at the same time as sales growth is difficult to capture and input costs are soaring. Difficult headwinds.
QE2 and emerging market growth may continue to lift all stocks, but my suggestion is to cull portfolios of the weakest firms with underfunded pension plans. Battling rising costs in a tough sales environment is difficult enough.