BP share price: Group flags US tax changes charge

Future earnings to be positively impacted by bill

BP share price: Group flags US tax changes charge

BP (LON:BP) has flagged a hit from US President Donald Trump’s tax reform. The oil major, however, expects that the changes, which include a cut to the corporate tax rate, will positively impact its future earnings on the other side of the Atlantic.

BP’s share price ended the previous year in positive territory, adding 0.79 percent to close at 522.70p. The advance was in line with gains in the broader UK market, with the benchmark FTSE 100 index ending the session 0.85 percent higher at 7,687.77 points.

BP flags US tax hit

BP announced in a statement this morning that the lowering of the US corporate income tax rate to 21 percent required revaluation of the group’s deferred tax assets and liabilities, with the current impact estimated to be a one-off non-cash charge of around $1.5 billion to the oil major’s fourth-quarter results. BP is scheduled to update investors on its performance on February 6.

The FTSE 100 company, however, expects that its future US after-tax earnings will be positively impacted by the changes, while cautioning that “the ultimate impact of the change in the US corporate income tax rate is subject to a number of complex provisions in the legislation which BP is reviewing”.

The comments come after Barclays (LON:BARC) warned at the end of last year that the US tax bill is expected to result in an associated one-off charge of about £1 billion to its profit after tax, as well as to about a 20 basis point reduction to its core capital ratio.

Analysts on BP

In rating updates, Royal Bank of Canada reiterated its ‘sector performer’ rating on BP today, with a price target of 550p on the stock. According to MarketBeat, the blue-chip oil major currently has a consensus ‘hold’ rating and an average valuation of 526.57p.

As of 08:05 GMT, Tuesday, 02 January, BP plc share price is 522.10p.

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