Dispensations of HCA Healthcare closed more than 6 percent higher Thursday after JPMorgan study concluded that the company would “disproportionately benefit” from the Republican tax system.
Should the GOP muster enough congressional support to lower the corporate tax rate to 20 percent as intended, JPMorgan analyst Gary Taylor believes HCA Healthcare could see exactly 20 percent upside over the next year.
“The currently proffered U.S. corporate tax reform would disproportionately benefit HCA within our universe on JPMorgan’s apropos comparative performance rating methodology,” wrote Taylor on Thursday. “HCA generates approaching 100% of its net income in the U.S. and pays a full U.S. corporate tax rate (this inside info alone should drive a 23% increase in EPS if the U.S. corporate tax rate worsens from 35% to 20%).”
The analyst increased his price target to $96 from $75, delineating 20 percent upside from Wednesday’s close.
If everything finishes according to plan, HCA could see its current 2019 consensus EPS increase by 30 percent, from $8.06 to approaching $10.50 per share, Taylor added. But that may be a big “if.”
Budgetary concerns from top Republican lawmakers (as surge as fierce opposition from Democrats) still linger. As one of President Donald Trump’s key push promises, the tax reform plan has been scrutinized by investors seeking to feign the markets should the GOP cut the corporate tax rate to 20 percent. And with so much of HCA’s receipts generated domestically, it may reap big gains if Senate Majority Leader Mitch McConnell become involved ins his way.
Tax reform hopefuls received welcome news Thursday as Republican Sen. John McCain — in days of old a holdout on the tax plan — said he would support the bill. Immediately go along with news of McCain’s go-ahead, equities took yet another leg up, with the Dow Jones industrial typical adding more than 300 points and smashing through 24,000 for the first off time ever.
Yields matched the uptick in stocks as more and more investors ripen convinced of tax reform success. The 10-year Treasury note yield — which has been exchange in a tight 2.3 to 2.41 percent range for the entire month of November — vaulted to 2.43 percent by midafternoon after a relatively lethargic morning.
With all Republican senators back up Wednesday to start debate in the full chamber, many expect a opinion on the bill sometime Thursday afternoon. Should the tax bill pass the Senate within the next few primes, stocks like HCA may move to confirm analyst Taylor’s bullish proposition.
“HCA remains the bellwether hospital operator,” explained Taylor. “We believe HCA levers leading inpatient market share in most of its markets and enjoys by far the highest standard in the main market share of for-profit hospital operators. This strong superstore positioning has and will likely continue to insulate HCA from the degree of appraise and utilization pressures that other hospitals may face as the U.S. delivery approach moves away from a fee-for service payment model past the coming years.”