How Would A Proposed Reduction In Federal Taxes By The Incoming President Impact Norfolk Southern?
The outcome of the recent U.S. presidential election has been viewed favorably by the equity markets, with President-elect Trump’s economic policies expected to provide a boost to economic activity. Among the range of measures being considered by the new administration is the lowering of federal corporate tax rates. President-elect Trump has proposed a lowering of the federal corporate tax rate from 35% to 15%. [1] It remains to be seen whether and to what extent the incoming administration follows through on the proposed corporate tax rate cut. However, a cut in corporate taxes will certainly boost the prospects of American companies. In this article, we will look at how Norfolk Southern would benefit from such a move.
Norfolk Southern was subject to an effective tax rate of around 36% last year, with federal taxes at the rate of 35% the largest component. [2] Thus, a cut in the federal corporate tax rate would significantly reduce the company’s overall tax burden. We have factored in an effective tax rate of 36% in our model for Norfolk Southern. While the extent of a potential federal tax cut will become clear only if and when the new administration spells it out, we will illustrate the impact of a reduction in the tax rate on Norfolk Southern’s stock price. We have created a scenario in which the federal tax rate is reduced to 25%, lowering the overall tax burden on the company to around 26%.
See our forecast for Norfolk Southern’s effective tax rate in this scenario
- What’s Next For Norfolk Southern Stock After A 21% Fall This Year?
- Which Is A Better Railroad Pick – Norfolk Southern Stock Or CSX?
- Will Norfolk Southern Stock Rebound To Its Pre-Inflation Shock Highs?
- Will Norfolk Southern Stock Trade Higher Post Q1?
- Why Did Norfolk Southern Stock Fall 30% Since 2021?
- Pick Either Norfolk Southern Stock Or This Travel Company: Both May Offer Similar Returns
If we factor in the foregoing tax rate assumption into our stock price model for Norfolk Southern, it boosts our price estimate by around 21% from the base case. Thus, if the incoming administration does implement a reduction in the federal corporate tax rate, it would certainly boost the prospects of Norfolk Southern.
See our complete analysis for this scenario here
Have more questions about Norfolk Southern? See the links below.
- What Is Norfolk Southern’s Revenue And EBITDA Breakdown?
- What Is Norfolk Southern’s Fundamental Value Based On 2015 Results?
- How Has Norfolk Southern’s Revenue Composition Changed Over The Last 5 Years?
- By What Percentage Did Norfolk Southern’s Revenue & EBITDA Grow In The Last 5 Years?
- By What Percentage Can Norfolk Southern’s Revenue & EBITDA Grow In The Next 3 Years?
- How Will Norfolk Southern’s Revenue Composition Change By 2020?
- What Would Be The Impact Of A 100 Basis Points Increase In Norfolk Southern’s Share Of U.S. Rail Intermodal Shipments?
- Norfolk Southern Corporation: A Look Back At The Year 2015
Notes:
See More at Trefis | View Interactive Institutional Research (Powered by Trefis)
Notes:- Trump and Taxes, Bloomberg [↩]
- Norfolk Southern’s 2015 10-K, SEC [↩]