A healthcare sector that is heavily reliant on debt to finance growth received another shot of good news Tuesday when the Federal Reserve Board left the benchmark borrowing rate near historic lows.
Fed Chair Janet Yellen also signaled in a speech Tuesday that the Fed would go slow in raising rates the remainder of the year, indicating that perhaps two hikes above the current 0.25% to 0.5% rate might be merited in 2016 instead of four hikes.
Healthcare stocks rose on the news led by Nashville-based AmSurg Corp., the physician-staffing and ambulatory surgery center giant.
AmSurg shares rose 4.92% or $3.51 to $74.90. The Modern Healthcare Hospital Stock Index, a basket of nine hospital company stocks, rose 3% today.
AmSurg was one of the few healthcare bright spots during the fourth-quarter earnings season. During a call with analysts in February, CEO Chris Holden said the company was still in acquisition mode after making $1 billion worth of purchases in 2015, including three large physician groups.
The company also posted strong earnings. In the fourth quarter, AmSurg posted net earnings attributable to common shareholders of $63.3 million, compared with $25.1 million in the year-earlier quarter. Revenue grew 21% year over year to $704.3 million.
Last year, AmSurg posted $153.4 million in net income, compared with $49.2 million in 2014. Revenue for the year soared to $2.57 billion from $1.62 billion in 2014.
Low interest rates are a welcome sight for healthcare companies looking to grow, said Chris Kelly, chairman and CEO of Emergency Physician Partners, a new physician-staffing company backed by $25 million in available capital from Claritas Capital Equity Group.
“The lower the rates, the more you can reasonably borrow and the more capital you can deploy to grow your company,” Kelly said.
The Dow Jones US Health Care Index rose 1.24% Tuesday, while the S&P 500 Health Care Index rose 1.17%.
Both moved higher than the S&P 500, which rose 0.89%.
