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AMN Healthcare's Growth Has Investors Feeling Better Than Ever

By Dan Caplinger - May 7, 2015 at 4:53PM

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The healthcare-staffing specialist put its best foot forward to open the year.

Image: AMN Healthcare.

The healthcare industry has gone through a huge transformation in recent years, with new regulation and reform efforts confronting hospitals and medical professionals with new challenges to get their jobs done. To help healthcare employers get the workers they need to succeed, AMN Healthcare ( AMN 0.72% ) provides staffing services and related solutions to optimize its clients' workforce. Coming into its first-quarter financial report, AMN Healthcare's stock had already reached its best levels since the mid-2000s, but the company performed far better during the quarter than even the most optimistic investors had expected. Let's look more closely at AMN Healthcare's latest results and see what's coming next for the company.

AMN cures its investors' concerns
AMN Healthcare's first-quarter results maintained the company's strong recent momentum. Revenue climbed 36% to $327.5 million, which was far above the roughly $312 million that most of those following the stock had expected. Net income of $12.2 million was up 60% from the year-ago quarter, and adjusted earnings of $0.30 per share easily topped the relatively weak performance forecast from investors.

AMN once again posted solid growth throughout the company. Sales in its key nurse and allied healthcare staffing unit soared 40%, and operating income from the segment climbed at an equally impressive 60% pace. Growth in the locum tenens staffing division for temporary fill-in professionals gained from last quarter's levels, rising 30% year over year and posting a roughly one-third gain in operating income. Even the small physician permanent placement services unit, which only brings in about 3% to 4% of AMN's total revenue, still grew sales by 11%, with operating income jumping by more than half from year-ago levels.

CEO Susan Salka once again celebrated her company's results. "Amid positive trends in the health care industry," said Salka in the company's earnings press release, "we continued to experience strong demand and outstanding execution across all business segments, resulting in better than anticipated revenue and profitability growth during the first quarter." The CEO also said she believes the company's competitive edge comes largely from how its service offerings stand out and offer added value compared to similar services from its rivals.

Image: AMN Healthcare.

What's ahead for AMN Healthcare?
AMN Healthcare also gave investors plenty of reason to expect the good times to continue. In its latest guidance, AMN said second-quarter revenue would come in between $335 million and $340 million, well above the $319 million that investors came into the day expecting. Overhead costs are expected to rise slightly as a percentage of revenue, but that is a consequence of higher labor costs to serve customers better. Moreover, with sales expected to climb by more than a third from year-ago levels, few investors are too nervous about reining in costs at the moment.

AMN's progress in getting the most from its recently acquired companies was also encouraging. As Salka explained, "our recently added Avantas, Onward Healthcare, Locum Leaders, and Medefis companies are performing and integrating well into AMN's service offerings." With so many service areas AMN can now cover -- including cloud-based vendor management and data analytics, as well as staffing at all levels on both a permanent and temporary basis -- the company has established itself as an excellent solutions provider for any healthcare company looking to simplify its operations. Moreover, AMN still strives to innovate, with Salka touting the company's potential to further develop its strategic workforce solutions offerings.

AMN Healthcare shareholders responded quite favorably to the news, with the company's stock closing up 8% in the trading session after the announcement. Even with the stock hitting its best levels in a decade, the strength of the healthcare industry generally has put AMN in a great position to capitalize on the demand from providers looking to streamline their organizations. As long as medical institutions have the financial ability to let others take care of some of their most basic workforce needs, AMN will be a key provider of the services its customers want and need.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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