InvestingDaily.com

Account Information

  • My Account

    Manage all your subscriptions, update your address, email preferences and change your password.

  • Help Center

    Get answers to common service questions, ask the analyst or contact our customer service department.

  • My Stock Talk Profile

    Update your stock talk name and/or picture.



Close
FEATURED STRATEGY

$1,230 in Instant Income?

$1,230 in Instant Income?Our top income expert recently pulled the wraps off his breakthrough moneymaking technique. And he proved beyond a shadow of a doubt how you can use it to generate instant cash payouts of up to $1,230 (or more). Over and over again. But then he took things a big step further and guaranteed you can make $1 million by following his program. And the second he did, our phones went nuts! Space is limited — get the details here.

 

 

All Things Are on the Table

By Ari Charney on February 24, 2017

While tax reform is a subject that puts most people to sleep, it’s the fuel that’s been powering the market’s rally since Election Day.

Even with President Trump’s vow to unveil a “phenomenal” tax plan, it’s starting to look like Congress might not get around to passing a tax-reform package until late this year.

Despite a unified GOP government, there’s still competition between the branches, including two separate tax proposals—the House Republican “Blueprint” and Trump’s campaign tax plan.

To reconcile their differences, there will be extensive negotiations between policymakers, not to mention intensive lobbying from businesses, before a growth-oriented tax bill is finally passed.

Although the market is still running on fumes, the typical ugliness of the legislative process has not been lost on Wall Street’s sell-side analysts, who have yet to incorporate potential tax changes into their earnings estimates.

For instance, strategists at Goldman Sachs believe that the market could end up giving back some of its recent gains once investors awaken to the reality that tax reform could provide a “small, later tailwind” to earnings growth than previously expected.

While corporate tax cuts are generally good for business, there are some sectors where their potential effect is more ambiguous, especially if lawmakers decide to offset lower tax rates by eliminating certain key deductions.

At Investing Daily’s Utility Forecaster, we’ve reviewed both tax plans, as well as utility executives’ response.

Their take? Well, it depends.

First, it’s important to note that regulated utilities would generally pass along any benefits realized from tax cuts to their ratepayers. So the benefit from lower tax rates would be indirect.

If consumers were to pay lower utility rates as a result of tax cuts, then it would give utilities more room to continue growing rate base through infrastructure upgrades and buildouts, which would give a slight boost to earnings growth.

Trump vs. Ryan

But in general, as far as utilities are concerned, the Trump plan would be a modest winner, insofar as its effect would be neutral, at worst, and moderately accretive to earnings, at best.

By contrast, House Speaker Paul Ryan’s plan is largely a loser for utilities. The consensus among the four utility super-giants—NextEra Energy Inc. (NYSE: NEE), Duke Energy Corp. (NYSE: DUK), Dominion Resources Inc. (NYSE: D), and Southern Company (NYSE: SO)—is that the Blueprint would be earnings neutral, at best, to 5% dilutive, at worst.

From the utility sector’s standpoint, the key distinction between the two plans is that Trump’s proposal would give companies the flexibility to choose which tax regime suits their business best, while the House plan is more akin to “one size fits all.”

The main wrinkle is over whether companies will be allowed to continue deducting interest paid on debt, a key issue for the capital-intensive utility sector.

Trump’s plan would allow companies to choose between immediately expensing business investments and continuing to deduct interest payments on bonds, whereas the House is hoping to offset the former by eliminating the latter.

In assessing the House plan, Southern’s CEO Tom Fanning observed, “ … this notion of eliminating interest deductibility is a grand experiment … [that could] radically change how America finances long-term capital.” 

“And if we’re trying to stimulate long-term capital,” he continued, “I’m not sure that’s the right way to go.”

At Utility Forecaster, our own take is constructive. The two plans aren’t all that far apart on their particulars, and their overall intent is the same: to stimulate business investment and the overall economy.

Additionally, we would expect policymakers to give essential-service providers such as utilities a sympathetic ear when it comes to granting sector-specific exceptions.

Furthermore, there will be considerable lobbying firepower trained on key members of Congress. As the chart below shows, the Edison Electric Institute, which is the association of investor-owned utilities, is no slouch when it comes to playing political moneyball in order to get the results the sector wants.

Source: OpenSecrets.org

For their part, utility executives are already using their powers of persuasion on lawmakers. Three of the four utility super-giants explicitly acknowledged that they’re already engaging with policymakers to ensure that their sector gets appropriate treatment. We think their efforts will ultimately prove successful.

As one Duke senior executive put it, ” … all things are on the table.”

To get my best investment pick for 2017, join me at our exclusive Investing Summit on April 6-7. I’ll share this pick for the first time with just you and a handful of other serious investors. I look forward to meeting you, so reserve your seat now…


You might also enjoy…

 

12 Stocks Virtually Guaranteed to Go Up in 2018

You may not believe it, but I have a calendar in my hands right now that tells me the exact date and time when a few stock are practically guaranteed to go up. 

Twelve of them, in fact.

And if you were to invest in them following the simple buy and sell instructions found in this calendar…

You could be making $1,181… $11,814…. and as much as $190,916 more than by using a “buy-and-hold” strategy.

And here’s the best part…

I’m giving away a few copies of this calendar to interested investors (First come, first served).

With this calendar, you could get higher profits with less risk.

Click here to get the full story, and to claim your copy.

Stock Talk — Post a comment Comment Guidelines

Our Stock Talk section is reserved for productive dialogue pertaining to the content and portfolio recommendations of this service. We reserve the right to remove any comments we feel do not benefit other readers. If you have a general investment comment not related to this article, please post to our Stock Talk page. If you have a personal question about your subscription or need technical help, please contact our customer service team. And if you have any success stories to share with our analysts, they’re always happy to hear them. Note that we may use your kind words in our promotional materials. Thank you.

You must be logged in to post to Stock Talk OR create an account.

Create a new Investing Daily account

  • - OR -

* Investing Daily will use any information you provide in a manner consistent with our Privacy Policy. Your email address is used for account verification and will remain private.