U.S. healthcare shares climb as investors see upside from Republican tax bill

U.S. healthcare shares climb as investors see upside from Republican tax bill

Shannon Stapleton

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NEW YORK (Reuters) - Shares of U.S. healthcare companies mostly climbed on Wednesday, as investors saw some potential upside for the stocks from a Republican-led bill to cut taxes.

Hospitals were among the biggest gainers on the day, with Community Health Systems up 6.2 percent and shares of Tenet Healthcare up 5.2 percent.

"We see tax reform as providing a durable benefit to healthcare services companies," Bernstein analysts wrote in a research note. "Healthcare services companies generally pay the full 35 percent corporate tax, as domestic companies with limited adjustments."

Possible changes to the Affordable Care Act and fees paid by health insurers could also benefit healthcare companies, they said.

"These changes are more likely to be included in the debt ceiling or budget legislation, but could be included in tax reform," the Bernstein analysts wrote.

Congressional Republicans were aiming to reformulate the tax-cut package to satisfy lawmakers worried about how much it would expand the federal deficit, with the measure moving toward a U.S. Senate floor vote later this week.

Shares of health insurers also rose, with UnitedHealth hitting a record high at $224.27 after its investor day this week.

The stock ended up 3.1 percent at $222.88.

"It was a very positive event by all accounts," said Sheryl Skolnick, director of research at Mizuho Securities in New York. "So that sort of settled people into a more optimistic mode."

UnitedHealth gave the biggest boost the S&P healthcare index <.spxhc>, which gained 0.5 percent.

But she also said there was less reason for hospital stocks to be gaining. The tax bill is seen helping some of the hospital companies, but not those that are heavily leveraged.

"They tend to perform better in November and December. They've underperformed for the year so maybe people are thinking they will do better toward year-end, but fundamentally nothing's changed."

(Reporting by Caroline Valetkevitch, editing by G Crosse)

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