Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of AMN Healthcare Services (NYSE:AMN), a medical staffing and workforce solutions company, plunged by as much as 20% following the release of its fourth-quarter earnings report. Shares have since recovered to trade lower by only 7.5% as of this writing.
So what: For the quarter, AMN reported revenue growth of 12% to $247.1 million and EPS of $0.15 as gross margin expanded 20 basis points to 28.5% from the previous year. Wall Street had only been expecting $0.11 in EPS and revenue of $241.9 million. For the upcoming quarter, AMN is forecasting revenue of $246 million to $250 million, with gross margin in the 28%-28.5% range and adjusted EBITDA of 7.5%-8% -- essentially a mirrored quarter to what it just reported. Revenue is about $5 million to $9 million above the Street's first-quarter estimate, with EPS in line to perhaps slightly higher.
Now what: This looks to me like a case of "can't please all of the people all of the time." AMN has more than doubled off its lows last summer, so it appears that investors were disappointed that its first-quarter earnings guidance wasn't higher. In addition, investors, even with today's drop, are paying close to 19 times forward earnings for a staffing agency, which seems an awfully steep price to pay in a sluggish U.S. economy. While I'm not denying that medical staffing can be lucrative, I'd prefer to see a sizable pullback in AMN Healthcare Services before I'd even consider suggesting the share price could head higher.
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