The ‘beginning of the end’ of the health-care recession

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CNBC’s Jim Cramer on Tuesday predicted the health-care business will quickly rebound after the industry fell into a significant downturn for the first time in his lifetime.

“[A]s the country gradually reopens, there are some industries that should do much, much better,” the “Mad Money” host said. “As states start to lift their lockdowns, I think that the beginning of the end for the health-care recession is finally arising.”

The coronavirus pandemic has put a financial strain on hospitals around the country as doctors have cancelled elective procedures and nonessential surgeries to free up resources for Covid-19 hospitalizations. The University of Michigan’s health system, for example, on Tuesday announced it would furlough 1,400 employees and institute a hiring freeze as it faces a $230 million shortfall in fiscal 2020.

Michigan Medicine is not alone, as hundreds of other hospitals, such as Stanford Health Care, have cut back on their staff. The pain is being felt at doctor and dentist practices across the country, Cramer noted.

As government officials turn their attention to relaunching state economies and easing quarantine orders, investors can expect consumer demand to quickly return for medical services such as Botox, which is owned by Allergan, he said.

AbbVie, which is in the middle of a $63 billion deal to buy the specialty pharmaceutical company, could see a boon in business, thanks to the pent-up demand, Cramer said. Shares of AbbVie as of Tuesday are within $13 of its peak February close before the coronavirus pandemic dropped the market from a bull run to a bear market in about a month.

“But now those dermatologists are opening for business and the pent-up demand is huge, which is exactly what AbbVie’s CEO, Richard Gonzalez, predicted on his excellent conference call last week,” Cramer said.

AbbVie reported a double beat in its first quarter on Friday. The drugmaker saw total revenues grow 10% in the three-month period, but Wall Street expects revenues to decline in the June quarter.

Allergan is set to report earnings next Tuesday. Analysts are expecting Botox sales to be up nearly 5% for the quarter ending in March and to drop double digits in the current quarter, according to FactSet estimates.

The Dow Jones advanced 133 points, or 0.56%, to 23,883.09, while the S&P 500 and Nasdaq Composite both moved about 1% higher in Tuesday’s session.

Stocks continue to rise as investors anticipate the U.S. economy will reopen for business, though restrictions will remain. Cramer warned that those restrictions will be bad for many businesses and may stay in place until a Covid-19 vaccine is available.

“The part of the market that’s working — health care, technology, life sciences, e-commerce — [is] doing so well that it obscures the pain in travel, leisure, banking, industrial, retail [and] restaurants,” he said. “Those losers are still weighing us down, but on a day like today it feels like they simply don’t matter.”

Disclosure: Cramer’s charitable trust owns shares of AbbVie.

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