Medical device companies and others in the healthcare sector stand to benefit from the tax reform Congress passed at the end of 2017, but the picture isn’t entirely rosy, according to a new report from S&P Global Ratings.
In many ways, the report offers a corrective to the bullish statements coming from corporate CEOs such as Johnson & Johnson’s Alex Gorsky, who recently told CNBC that J&J will repatriate $16 billion in cash thanks to the new law.
“I think the fact that we now actually have a competitive tax rate, that we’ve got a construct in place to repatriate earnings and cash from overseas is going to give us much more flexibility and make us more competitive,” Gorsky told CNBC in an interview.
Here’s how the S&P report, published on Jan. 2, broke down the situation – along with companies that especially stand to benefit:
1. Corporate tax rate cut: What tax cut?
One of the top business-friendly measures of the tax reform involved cutting the U.S. corporate tax rate this year to 21% from a previous 35%. But many large medical device companies already have a low effective tax rate because they’re doing business around the world, according to S&P.