Leucadia To Gain From New Tax Law, Pro-Business Environment
Zacks Investment Research | Jan 15, 2018 09:53PM ET
On Jan 16, we updated the research report on Leucadia National Corporation (NYSE:LUK) .
Leucadia operates through numerous financial services businesses and merchant banking investments across the globe. As each of these businesses operates according to their own cycle, it leads to well diversified revenue streams for the company. Stronger results from some businesses help to offset weaker results in others, making the company relatively immune to individual business performance.
Leucadia seems poised to benefit from the pro-growth business environment coupled with a lower corporate tax structure. President Trump’s plans of spending $1 trillion in infrastructure projects over an extended period of 10 years, along with regulatory rollbacks to aid profitability of small and medium-sized companies, bode well for Leucadia.
Leucadia's businesses appear favorably positioned, particularly Jeffries. Jeffries’ performance has improved from the recent past, when it was affected by volatility in oil prices and oil-related junk bonds. Companies like National Beef have also had a difficult period in the past years as Americans have switched to healthier eating habits causing the cattle industry to go on a decline. But the fundamentals seem to be improving at present. Profit margins of National Beef have recently improved as the demand for beef has picked up. Investors now have a more optimistic outlook on these companies.
However, Leucadia has a significant exposure to the European market. In light of the Brexit referendum, the European economy is faced with uncertainties, making the company’s revenues unpredictable. Brexit could further result in higher tariff and non-tariff barriers to trade between the U.K. and the European Union, lowering the productivity of the company.
Nevertheless, we maintain a bullish outlook on this stock as it remains well positioned to grow. The company’s shares have outperformed the Zacks Investment Research
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