The Toronto-Dominion Bank TD anticipates reduction in its first-quarter fiscal 2018 profits because of the changes in the U.S. tax code. The amount by which it expects its bottom line to reduce is US$ 400 million.
The Tax Cuts and Jobs Act was passed by the Congress on Dec 22, 2017. The act, among other things, dropped the U.S. corporate tax rate to 21% from 35%. Though this act is expected to drive earnings over the long term, it has led many companies to declare write downs because the reduced rate changes the value of deferred tax assets already held by firms on their balance sheets.
Many foreign companies doing business in the Unites States will be impacted by the latest tax reform. However, the financial services companies are expected to benefit the most from the new tax act.
Though Toronto-Dominion is the first to make this announcement, we expect many other companies will follow this.
The common equity Tier I capital ratio, which came in at 10.7%, at the end of fourth-quarter 2017, is also predicted to drop by 9 basis points, due to the tax reform.
In a statement issued by the bank, it said, “While the Tax Act will require a one-time charge to earnings in the first quarter of fiscal 2018, the lower corporate rate is expected to have a positive effect on TD's future earnings.”
These are just estimates and we will have to wait till Mar 1 for the exact figures when the company will release its fiscal first-quarter results.
Shares of Toronto-Dominion have rallied 18.8% in the past six months, outperforming 11.7% growth recorded by the industry.
Currently, the bank carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the same space are KB Financial Group KB, Macro Bank BMA and ING Group N.V. ING. All these stocks carry a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
KB Financial witnessed 3.6% upward earnings estimate revision for 2017 in the past 60 days. Moreover, its shares have gained 23.2% in the last six months.
Macro Bank’s earnings estimates have been revised 16.2% upward for 2017, over the past 60 days. Also, its share price jumped 25.9%, over the last six months.
ING Group’s 2017 earnings estimates were revised upward by 3.2%, over the last 30 days. Further, its shares increased 6.1%, in the last six months.
Zacks’ Best Private Investment Ideas
While we are happy to share many articles like this on the website, our best recommendations and most in-depth research are not available to the public.
Starting today, for the next month, you can follow all Zacks' private buys and sells in real time. Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors.
Click here for Zacks' private trades >>
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
Toronto Dominion Bank (The) (TD) : Free Stock Analysis Report
KB Financial Group Inc (KB) : Free Stock Analysis Report
Macro Bank Inc. (BMA) : Free Stock Analysis Report
ING Group, N.V. (ING) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research