UBS: These 15 companies will benefit the most as Americans start paying less taxes next month

Americans should start to see the impact of the Republican tax law next month. The Internal Revenue Service has directed employers to update their income-tax withholdings to reflect the new law by February 15.

UBS thinks certain parts of the economy will disproportionately benefit from consumers’ bigger paychecks.

“We find that lodging, entertainment, housing, other transport (i.e. air) should benefit most, with incremental growth of ~3% above prior baseline levels, followed by alcohol and new cars,” Keith Parker, the head of US equity strategy at UBS, said in a note on Thursday.

Based on new guidance from the Internal Revenue Service, UBS estimates that the monthly pay increases would range from $US86 for a couple earning $US50,000 to $US1,456 for a couple earning $US500,000.

The bank’s consumer analysts picked 15 stocks they see as the biggest beneficiaries from higher disposable incomes.


Home Depot

Ticker:
HD

Thesis: “Building materials has been gaining wallet share for the last 5 years, which should be aided by greater disposable income.”


Lowe’s

Ticker:
LOW

Thesis: “Building materials has been gaining wallet share for the last 5 years, which should be aided by greater disposable income.”


Dollar Tree

Ticker:
DLTR

Thesis: “Dollar stores have most exposure to the low end consumer, who should have the highest marginal propensity to spend.”


Dollar General

Ticker:
DG

Thesis: “Dollar stores have most exposure to the low end consumer, who should have the highest marginal propensity to spend.”


Hilton

Ticker:
HLT

Thesis: “Most attractive way to participate in lodging upside.”


Carnival Corp.

Ticker:
CCL

Thesis: “Investing in cruise lines is the equivalent of investing in leisure segment of hotels, with benefit of tax structure, high barriers to entry, & movable assets.”


Royal Caribbean

Ticker:
RCL

Thesis: “Investing in cruise lines is the equivalent of investing in leisure segment of hotels, with benefit of tax structure, high barriers to entry, & movable assets.”


Burger King (owned by Restaurant Brands International)

Markets Insider

Ticker:
QSR

Thesis: “Benefit from the low-end consumer, combined with brand momentum should lead to sales gains.”


Starbucks

Markets Insider

Ticker:
SBUX

Thesis: “Higher disposable income should lead to more discretionary spending, potentially benefitting traffic and ticket.”


Ford

Markets Insider

Ticker:
F

Thesis: “Lower tax withholdings should help offset expected pricing pressure in the used vehicle market, benefiting the US automakers.”


LVMH

Ticker:
LVMUY

Thesis: “High exposure to the US and strong brand heat.”


Kering

Ticker:
PRTP

Thesis: “High exposure to the US and strong Gucci brand heat.”


Anheuser-Busch InBev

Ticker:
ABI BB

Thesis: “Beer volume benefits from low and middle class consumers’ increased visits to restaurants and casual dining.”


Diageo

Ticker:
DGEAF

Thesis: “Beer volume benefits from low and middle class consumers’ increased visits to restaurants and casual dining.”


L’Oreal

http://markets.businessinsider.com/stock/LOr%C3%A9al-Quote

Ticker:
OR FP

Thesis: “Elevated exposure to the US market combined with products (particularly in luxury) positioned to benefit from increased discretionary spending.”


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