Telecom to Post Tax Gain, Lifting Quarter Results -- WSJ
January 18 2018 - 2:02AM
Dow Jones News
By Ryan Knutson
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (January 18, 2018).
Verizon Communications Inc. said it expects to book a nearly $17
billion gain in its fourth-quarter profit due to the new tax
law.
Reducing the corporate income-tax rate will slash Verizon's
$48.3 billion deferred tax liabilities by $16.8 billion, the
company said in a securities filing Wednesday. Verizon will record
the reduction as a one-time gain boosting earnings.
Similar bookkeeping moves are expected from other U.S. firms as
they report results, even if the numbers won't be as large. For the
most part, investors and analysts will look past these paper gains
as they don't result in money that companies can spend.
Most of Verizon's deferred tax liabilities came from buying
airwaves licenses and investing in network infrastructure, a
company spokesman said. Verizon said it only had to pay this tax
liability in the event the company was sold, and even then, the
taxes would have to be paid over the course of several years.
In other words, deferred taxes aren't something Verizon was
planning to pay anytime soon, so the savings won't translate into
cash. Because deferred tax liabilities are taxes payable in the
future, the tax law's reduction in the corporate tax rate to 21%
from the previous 35% reduces those liabilities, leading to a
gain.
The one-time change will add $4.10 to the company's 2017
earnings per share. Analysts had estimated 2017 earnings of $3.68,
excluding any special items, according to Thomson Reuters. In 2016,
Verizon's per-share profit was $3.21.
The tax law is causing all sorts of aberrations on company
earnings. Some companies, like General Motors Co. and Bank of
America Corp., are taking hits to their profits because they have
deferred tax assets, or credits and deductions used to defray
future tax bills, which are less valuable now that the tax rate has
been lowered. Others, like Verizon and Wells Fargo & Co., are
seeing a benefit.
Verizon reports fourth quarter earnings on Jan. 23.
Michael Rapoport contributed to this article.
Write to Ryan Knutson at ryan.knutson@wsj.com
(END) Dow Jones Newswires
January 18, 2018 02:47 ET (07:47 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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