How Changes To The U.S. Tax Code Could Impact AT&T And Verizon

by Trefis Team
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The U.S. government recently passed one of the biggest changes to the tax code in decades, as it seeks to increase investments and accelerate economic growth. Under the new tax bill, the corporate tax rate will be lowered to 21% from 35%, while the overall tax structure is also expected to be simplified. Large telecom companies such as Verizon (NYSE:VZ) and AT&T (NYSE:T) could have a lot to gain from the changes, given their large and fairly consistent profits. Moreover, these companies derive a bulk of their revenues from the domestic market, with most of their capital investments and workforce in the U.S. While the impacts of the tax reform are likely to be partly baked in to the market prices of these companies, the full impact of the tax cuts on stock valuations are only expected to be felt in the years to come, as companies potentially deploy tax savings into more productive avenues. We have created an interactive model that details how changes in effective tax rates can impact the valuation of these major telecom companies. You can modify assumptions such as projected taxable income, long-term growth rates and discount rates (weighted average cost of capital) to see how the tax rate/valuation dynamics change.

 

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