By: Carter Copeland

With initial 2018 outlooks set to include the benefits of tax reform, like others we’re updating our models with new effective rates: For our commercial aerospace coverage, the average book tax rate decreases ~800bps to ~22%. For our defense coverage, the average tax rates decrease ~900bps to ~22%. The largest decreases in effective tax rate accrue to ARNC and BA on the commercial side and BAH and RTN on the defense side. Along with the benefits to EPS across our coverage universe, we’ve also adjusted our FCF conversion assumptions to incorporate impacts from full capex expensing, deemed repatriation and interest expense deductibility.

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