By Lewis Krauskopf
NEW YORK (Reuters) - Sweeping U.S. tax legislation appears to be on the verge of approval, lifting the prospects in particular for banks, telecoms, transports and other industries that stand to gain the most from lower corporate tax rates.
The Republican-led U.S. House of Representatives hit a last-minute snag on Tuesday in their drive to approve the legislation favored by President Donald Trump. The plan on Capitol Hill was for the Senate to delete three offending provisions in the House version and vote on the bill, then send it back to the House for a vote on Wednesday.
The bill slashes the corporate income tax rate to 21 percent from 35 percent. That would boost overall earnings for S&P 500 companies by 9.1 percent, according to UBS equity strategists.
For an interactive graphic on how the bill ripples through industries: http://tmsnrt.rs/2kf26gx
Momentum behind the tax bill over the past month has helped propel the stock market, which had already rallied sharply this year, to fresh record highs.
The S&P 500 has climbed about 5 percent since mid-November when the House of Representatives passed its tax overhaul bill.
But the bill, which also includes a one-time tax on profits held overseas and industry-specific measures, would benefit some stocks, industries and sectors more than others.
The industries that stand to benefit most from the lower rates are telecoms, transportation, retail and banks, analysts said.
But for some groups, such as tech and healthcare, the impact is more mixed.
HEALTHCARE
Domestically geared healthcare companies that focus on services are poised to benefit from the lower tax rate.
Hospital operator Universal Health Services Inc, lab-testing company Quest Diagnostics Inc and drug wholesaler Cardinal Health Inc are among the service companies set to benefit the most, according to Mizuho Securities.
"We believe tax reform should be a significant positive cash flow event, especially for healthcare services companies that tend to have limited international exposure and significant capital expenditures," Mizuho analysts said in a research note.
While many large drugmakers already report adjusted tax rates in the low 20 percent range, a number of companies would benefit from the ability to bring back overseas cash, JPMorgan analyst Chris Schott said in a recent note.
According to Schott, Pfizer Inc, with $160 billion in offshore earnings, and Merck & Co Inc, with $70 billion, are particularly poised to gain from repatriating overseas funds.
BANKS
Banks are expected to be among the biggest winners from a lower tax rate. The S&P 500 banks index has soared 9 percent since mid-November as the tax bill began moving swiftly through Congress.