Kinder Morgan, Inc.’s KMI fourth-quarter 2017 earnings are likely to face the brunt of U.S. tax reforms.
Kinder Morgan is expected to face a one-time charge of $1.4 billion against earnings, as lower tax rates will affect the value of deferred tax assets. Per the company, the charge was a preliminary estimate and will be applied against fourth-quarter 2017 earnings.
However, the company forecasts the scenario to improve over a period of 10 years. Kinder Morgan continues to develop its ability to fully expense capital spending on certain assets. Additionally, lower corporate tax rate bodes well for the company.
In January 2018, BP announced that it will receive a one-off non-cash charge of about $1.5 billion in fourth-quarter 2017 results, following the U.S. Corporate Tax reform.
Since the energy industry is capital intensive, the new changes in corporate taxes are beneficial. The companies will be able to deduct capital expenditures from taxable income, immediately, per the provisions of the tax reform bill. Currently, capital expenditures cannot be deducted from the tax in the year they are incurred. Consequently, the domestic companies need to plan expenditures, strategically.
In 2018, the companies’ tax bills will be lowered due to higher deductions. The companies will have more cash in hand to fund capital expenditures, acquisitions and share repurchases. Hence, we can expect higher spending by oil majors.
Some oil majors with huge capital spending like ExxonMobil Corp XOM, Chevron Corporation CVX and Royal Dutch Shell plc RDS.A are likely to gain from these changes.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment