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Smiths Group expects healthy tax cut in US

The maker of medical devices could see the tax rate fall by as much as 5.5 percentage points
Lab technician
Smiths Group welcomes changes in US tax laws

Smiths Group PLC (LON:SMIN) saw its shares gain nearly 5% on Friday after the FTSE 100 listed firm said that new tax rules in the US will have a favourable effect in the current year and beyond.

The x-ray device maker anticipates a headline effective tax rate of 27.5% to 28.5% for the year ending July 31, including one-time charges related to adverse revaluation of the deferred tax position.

READ: Smiths Group posts solid growth in reported profits, revenue, but underlying growth more constrained

Looking ahead to 2019 and beyond, the company expects a headline effective tax rate in the range of 23% to 25%.

By late morning, Smiths Group were up 5%, or 78p at to 1,645.5p.

In a note to clients, analysts at Numis Securities trimmed their rating for the stock  to ‘add’ from ‘buy’, pointing out that a price/earnings valuation for 2019 of 16x in line with the sector suggests a target price of 1,725p.

They added: “Key for the shares remains kick-starting growth in the Medical division which management has suggested will commence in H2 2018.”

 -- Adds broker comment, updates share price --

 

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