Berkshire Hathaway could gain $37 billion from GOP tax cuts
Berkshire Hathaway (BRK.A), the conglomerate led by Warren Buffett, stands to gain an potential $37 billion from the GOP's tax cuts, according to new research from Barclays.
"We now estimate Berkshire Hathaway's 4Q book value could be boosted by about $37 billion resulting from the US corporate tax reform due to a decline in its deferred tax liability," analysts at the firm wrote in a report on Monday.
The authors also said the reduction in the corporate tax rate could lift the company's earnings power by as much as 12 percent "in 2018 and beyond," and it could repatriate some foreign profits and use it for investment.
In December, Berkshire Hathaway's Class A stock -- the most expensive in the U.S. -- topped $300,000 for the first time ever.
For years, U.S. companies have parked money overseas to avoid the higher U.S. corporate tax rate. It has been expected that changes in the law would prompt some of those companies to return money to the U.S., potentially $2.5 trillion or more.
Economists, however, believe the overall effect of repatriated corporate cash on the U.S. economy will be muted this time around, much as it has been when allowed in the past.
Still, the tax measure signed into law by President Donald Trump last month spreads benefits across a wide array of American industry, including banks.
Finance and insurance companies would have paid an effective corporate tax rate of 26.1 percent this year. Now, it will be 14.3 percent. Analysts at Goldman Sachs (GS) have estimated that the tax law will boost big-bank earnings per share by 13 percent this year. The top beneficiary will be Wells Fargo (WFC), which has been dogged by scandals that it has cheated customers. Goldman estimates that Wells Fargo will enjoy an 18 percent earnings surge in 2018.