Adobe stock jumps after it says it’s expecting lower tax rates

Key Points
  • Adobe expects its tax rate to be around 11 percent, below its guidance of about 21 percent, through 2018.
  • The company expects to have a one-time accounting charge of $85 million as a result of the tax reform.
Shantanu Narayen
Mark Neuling | CNBC

Adobe stock rose more than 3 percent on Monday after the company said its effective tax rate should be lower in 2018 as a result of recently passed U.S. tax reform.

That's in contrast to IBM's statements last week which is leading to a higher tax rate.

The tech company said that it's expecting an 11 percent tax rate, excluding certain items, through all four quarters of its 2018 fiscal year, which will end on Dec. 1. The company was previously expecting a 21 percent tax rate for the fiscal year.

Additionally, in the 2019 fiscal year Adobe expects the tax rate to "stabilize" at around 18 percent, which is still below the company's 2017 fiscal year tax rate of 21 percent.

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"The new Tax Act is lowering Adobe's effective tax rates, driving a significant increase in our earnings per share targets," outgoing Adobe CFO Mark Garrett said in a statement. "With ready access to our offshore cash, we will continue to evaluate investment opportunities to grow our business and we are actively expanding our campuses in the Bay Area and Utah to accommodate the growth of our employee base."

Adobe expects to make a one-time charge of $85 million as a result of the tax reform.

The company also raised its estimates for the first quarter and full year of its 2018 fiscal year. For the full year, Adobe expects $6.20 in earnings per share, excluding certain items, which is above the previous target of $5.50 per share, and it's also above the FactSet consensus estimate of $5.56 per share, according to StreetAccount.

In a filing on Monday, Adobe said that Garrett, who's been the company's CFO since 2007, will retire this year and that the company is looking for his successor.

Adobe CFO Mark Garrett to retire this year