Who will win and lose from the "big and beautiful" law: Morgan Stanley's forecast

Donald Trump is preparing to sign the "Big and Beautiful Bill", which cuts taxes, eliminates tax credits for the purchase of electric cars, allows for the expansion of the US budget deficit and affects a number of other areas, including industry and health insurance. The White House reported that the president will sign the document on Friday, July 4, when the U.S. celebrates Independence Day.

A day earlier, the bill was approved by the House of Representatives, the lower house of the U.S. Congress. The Senate's approval came on July 1: the vote was split in half, with Vice President J.D. Vance casting the deciding vote.

Morgan Stanley analysts did not expect the bill to pass Congress so quickly a week and a half ago: they assumed that it would happen only in early August, according to the bank's note (Oninvest has it). In the same note, the analysts named the companies and industries, which, in their opinion, will suffer or, on the contrary, will benefit from the adoption of the law.

- Businesses that invest intensively in R&D and capital-intensive industries - aerospace and defense, energy, telecommunications, industrial and technology companies. They will benefit from changes in the rules for writing off and amortizing research and development (R&D) expenses, as well as from easing restrictions on interest deductions: they can be calculated from EBITDA (earnings before interest, taxes, depreciation and amortization) instead of EBIT. As a result of these measures free cash flows will improve and the tax burden of such companies will be reduced, Morgan Stanley suggested.

- Renewable Energy Sector. The U.S. Senate has proposed more lenient conditions for phasing out tax credits for solar and wind energy projects. This would give such projects a longer horizon of favorable financing. For example, energy storage-related energy projects would retain the full rate of the investment tax credit if construction begins before 2033.

On the other hand, solar power equipment manufacturers (e.g., Sunrun, Solaredge and Enphase Energy) will face challenges as the final version of the bill prohibits certain solar panel leasing arrangements, which could have a negative impact on their business models and shares.

- The bill proposes cuts funding for Medicaid, a health care program for low-income people. One provision involves reducing the taxes that health care providers pay to the state from the current 6 percent to 3.5 percent by 2032. That poses risks for companies with a high share of Medicaid in their revenue mix: lower rates could reduce payments to healthcare organizations under Medicaid and worsen profitability, Morgan Stanley warned. United Health Services (UHS) is most heavily dependent on Medicaid, while HCA Healthcare is less vulnerable because it has many hospitals in states that have not expanded Medicaid (e.g., Florida and Texas).

Overall, stocks of companies owning healthcare providers are likely to remain volatile throughout the budget reconciliation, Morgan Stanley warned. The bank's analysts in the sector favor Tenet Healthcare Corporation (THC), the note said.

This article was AI-translated and verified by a human editor