Trump aims to cut corporate taxes to 15%. These stocks could benefit, Wolfe says
President-elect Donald Trump has called for cutting the corporate tax rate — and a slate of companies could stand to benefit, according to an analysis from Wolfe Research. Tax policy will likely be a centerpiece of discussion in January as Trump kicks off a second term in the White House and Republicans take a majority of the seats in the House of Representatives and the Senate. In addition to addressing individual provisions in the Tax Cuts and Jobs Act that are set to expire at the end of 2025, lawmakers will turn their attention toward Trump’s call for a corporate tax rate as low as 15% for companies that manufacture their products domestically. That would be a reduction from the current corporate tax rate of 21%. “Budgetary issues notwithstanding, given the GOP trifecta, we also would not rule out the possibility of cutting the US Corporate tax rate to 18%,” Chris Senyek, Wolfe’s chief investment strategist, wrote in a Monday note. A corporate tax rate of 18% would increase S & P 500 earnings per share by $5, while a 15% rate would lift earnings per share by $10, he said. Senyek’s team identified companies that could see the greatest impact on their earnings per share from a lower tax rate. The firm screened for stocks that were subject to an old tax benefit known as the Section 199 domestic production activities deduction in 2015, 2016 and 2017 — the last three years of this provision’s applicability. Here are a few of the names the team found. Warner Bros. Discovery made the list. Earlier this month, Wolfe upgraded its rating on the media giant to peer perform from underperform, citing its streaming service Max’s “leverage to the industry’s re-bundling and partnership trends.” “Max’s international acceleration, [direct to consumer]’s inflection to meaningful profitability and growing appetite by traditional TV distributors to carry streaming services + linear nets should provide Warner with [free cash flow] to pay down debt and invest in its healthier businesses,” wrote analyst Peter Supino. Another factor in the company’s favor is that while odds of a spin-off or a sale were low under the Biden administration, with Trump returning to the White House, the chances for potential deals have risen, Supino added. Shares of Warner Bros. Discovery are down 9% in 2024. Of the 30 analysts covering the name, 16 rate it a hold, according to LSEG. Wolfe also highlighted Amazon in its list of companies that could benefit from a lower corporate tax rate. The e-commerce giant does have exposure to Trump’s proposed tariffs of at least 60% on China goods, according to Wells Fargo analyst Ken Gawrelski, but he said this should be manageable for Amazon. “AMZN has most meaningful exposure to China-sourced goods at est. 50%, but still likely able to mitigate impacts,” he wrote in a Sunday report. The analyst also said that cross-border shipping restrictions on low-cost retailers Temu and Shein could be “materially positive” for Amazon. Shares of Amazon are up more than 35% in 2024. In all, 66 of the 70 analysts covering the name deem it a buy or strong buy, per LSEG. Fintech and payments company Fiserv also ended up on Wolfe’s list. Bank of America earlier this month highlighted Fiserv among the companies in its coverage that has high U.S. exposure and thus is likely to catch a tailwind from lower corporate tax rates. Goldman Sachs also called out the company as a beneficiary from a potential increase in bank mergers and acquisitions under the Trump administration. Fiserv is having a strong year , up more than 66%. Of the 38 analysts covering the stock, 32 rate it a buy or strong buy, per LSEG.
