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New Trump tax plan will boost these 5 top stocks

President Trump’s 100-word tax plan has been revealed. In line with one of his key campaign promises, he wants to slash corporate income tax from its current level of 35% to just 15%. His goal is to “lower the business tax rate from one of the highest in the world to one of the lowest.”

A cut of 20% may well prove overly ambitious. Based on speeches made by Trump before he became President, the Tax Policy Center examined the effects of his tax proposals on the US economy. They concluded that “the revised Trump tax plan would reduce federal revenue by $6.2 trillion over the first decade of implementation and by an additional $8.9 trillion in the second decade. Three-fourths of the revenue loss would come from reductions in business taxes.

Nonetheless it is likely that a substantial corporate income tax cut will occur at some point. More realistic figures center around the 25% mark which is still a significant 10% drop from where we are now. How would such a tax cut impact stocks- and which stocks would stand to benefit the most from these lower rates? According to Jefferies equity research team, the market is not yet pricing in a tax reform which makes it even more interesting to delve into the outlook for specific top stocks.

TipRanks database covers over 5,000 US stocks from multiple sectors and industries. By tracking analyst recommendations on these stocks, TipRanks reveals the analyst consensus rating on a stock be it strong buy/ sell, moderate buy/ sell or hold. Based on a report from Jefferies, we looked for five strong buy stocks from five different industries that will reap the rewards from the implementation of this new tax policy (even in modified form):

United Health (UNH)- with no buy or hold ratings, tax reform could be a “potential driver” for this popular healthcare stock according to Oppenheimer’s Michael Wiederhorn– one of TipRanks’ top 25 analysts. He reiterated his buy rating on the stock on April 19 with a $187 price target (7.4% upside) while praising the company’s “strong core trends.”

Charles Schwab (SCHW)- five-star Jefferies’ analyst Daniel Fannon says SCHW will see a “significant benefit” from corporate tax reform because as a purely domestic business SCHW pays a high tax rate of 37%. He “expect[s] the company to pass this benefit on to shareholders”. This strong buy stock has 17% upside potential according to top analysts polled by TipRanks.

Dean Foods (DF)- this American food and beverages company pays a very high tax rate of about 38% so it would benefit disproportionately from a rate cut. TipRanks shows that Dean Foods has a strong buy analyst consensus rating with the most recent buy rating from four-star analyst Ashkay Jagdale. He gave the stock a $24 price target (23% upside from the current share price of $19.41).

Amazon (AMZN)- as Amazon pays an effective tax rate of over 30% it would seriously benefit from the proposed cuts says Jefferies Brian Fitzgerald. He points out that “with about half of units sold by third-party vendors, a border tax would not impact Amazon as much as investors might think (the burden would fall on the vendors). This represents an additional advantage over brick and mortar competitors.” Fitzgerald reiterated his buy rating on the tech giant on April 28 with a bullish $1,150 price target vs the current share price of $946.

Comcast (CMCSA)- nine analysts have published buy ratings on the world’s largest broadcasting and cable television company over the last three months. In particular, top Pivotal Research’s Jeffrey Wlodarczak reiterated his buy rating on April 28 with a $48 price target (currently shares are trading at $39). He says Comcast’s free cash flow (FCF) should accelerate as the company “generates significant free cash flow potentially boosted by lower tax rates (+ lower tax rates should substantially reduce CMCSA’s current tax liabilities).”

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Harriet Lefton
Harriet Lefton, originally from the UK, began her career as a journalist specialising in the niche world of metal markets. She graduated from the University of Cambridge before becoming a qualified UK lawyer. Now she has turned her attention to the world of financial blogging, covering US stocks, analysts and all manner of things finance-related.

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