The returning Trump administration will seek more tax reforms pending approval from Congress. They plan on making the 2017 Trump tax cuts permanent and even lower some rates. The corporate tax rate will be dropped to 15% while the child tax credit is hiked. Many of the green-energy tax breaks from the 2022 Inflation Reduction Act are expected to be terminated. Jeffries believes smaller cap companies in the financial, industrial, consumer, and basic materials sectors are set to benefit the most. Here are seven companies that investors may want to watch that will gain from tax reports.
1. Wingstop: A 7% EPS Bump Is No Chicken Scratch
Fast-casual restaurant operator Wingstop (NASDAQ:WING) is a winner.
The company posted a third-quarter 2024 domestic comparable sales growth of 20.9% YoY.
According to Jeffries analyst Andy Barish, a 500 bps reduction in its tax rate could translate into an incremental 6% to 7% EPS bump. Wingstop offers domestic and international franchises, but the domestic operations would benefit the most.
2. Post Holdings: It Pays to Sell in the United States
Cereal and packaged foods producer Post Holdings (NYSE:POST) generates between 80% to 90% of its revenues domestically.
According to Jeffries analyst Rob Dickerson, tax policy changes could impact Post’s rate by 400 bps to 450 bps.
This could result in an increase in free cash flow (FCF) to around 4% over the following three years compared to current consensus estimates.
3. Valvoline: Adjusted Earnings-Per-Share Could Spike 6%
Automobile service center operator and franchisor Valvoline (NYSE:VVV) would find some relief being in one of the highest tax rates at 25.5% in 2024.
It would be a top beneficiary as a result of lower corporate taxes.
According to Jeffries analyst Bret Jordan, a 500 bps corporate tax reduction would lower its tax rate to 20%, which would go right into its bottom line, boosting its adjusted EPS by 6%.
4. BJ’s: Warehouse Club Operator Could See Additional 7% Full-Year EPS Bump
Warehouse club operation BJs Wholesale Club Holdings (NYSE:BJ) is poised to see full-year 2025 EPS estimates jump from $4.30 to $4.60 on a 500 bps tax cut.
According to Jeffries discount retailer analyst Corey Tarlowe, this would equate to an extra $40 million of net income or 7% added to the bottom line.
This additional income could provide BJ's with more flexibility to invest in growth initiatives or return value to shareholders.
5. Hilton: An Additional $8 Per Share of Adjusted FCF and EPS Could Materialize
Jeffries gaming, lodging, and leisure analyst David Katz estimates hotel operator Hilton Worldwide Holdings (NYSE:HLT) will see a nearly $27 million increase for every 100 bps tax rate reduction in its full-year 2025 adjusted FCF.
A 500 BPS tax cut would equate to a $134 million bump in its adjusted 2025 FCF, dropping its corporate tax rate to 25.7%.
The bottom line is that the full-year 2025 EPS upside could materialize into an additional $8 per share.
6. Best Buy: Net Income Could Face a 6% Bump
Consumer electronics big box retailer Best Buy (NYSE:BBY) could see its annual tax rate drop from 24% to 19% on a 500 bps corporate tax rate drop.
Based on calendar year 2025 street estimates, Best Buy could see net income and EPS grow by an additional 6%.
This could generate $93 million in cash, which Jeffries hardline analyst Johnathan Matuszewski believes the company will use to buy back more shares and update interior store displays.
7. BellRing Brands: Income See a 6% to 7% Pump
According to Jeffries beverages, consumer product, and health & wellness analyst Kaumil Gajrawala, healthy snack and protein supplements producer BellRing Brands (NYSE:BRBR) would deepen near-term reinvestment plans for marketing and innovation with a 500 bps tax rate cut.
The tax rate cut from 24.5% to 19.5% could pump up near-term EPS by 6% to 7%.