AMN Healthcare (AMN) Q3 Earnings Beat Estimates, Margins Down

AMN Healthcare Services, Inc. AMN delivered adjusted earnings per share (EPS) of $2.57 in the third quarter of 2022, which improved 48.6% year over year. The figure surpassed the Zacks Consensus Estimate by 10.3%.

Our projection of adjusted EPS was $2.00.

GAAP EPS for the quarter was $2.10, reflecting a 36.4% uptick from the year-earlier figure.

Revenues in Detail

AMN Healthcare registered revenues of $1.14 billion in the third quarter, up 29.7% year over year. The figure surpassed the Zacks Consensus Estimate by 3.9%.

The third-quarter revenue compares to our estimate of $1.09 billion.

Robust segmental performances significantly drove third-quarter revenues.

Segment Details

AMN Healthcare conducts its business via three reportable segments — Nurse and Allied Solutions, Physician and Leadership Solutions, and Technology and Workforce Solutions.

In the third quarter of 2022, the Nurse and Allied Solutions segment’s revenues totaled $828.3 million, up 32.1% year over year. Travel nurse staffing revenues grew 31% year over year, whereas allied division revenues rose 39% year over year.

This figure compares to our Nurse and Allied Solutions segment’s Q3 projection of $784 million.

The Physician and Leadership Solutions segment’s revenues totaled $175.2 million, up 16.3% year over year. This upside was on the back of a 19% growth in locum tenens revenues, which amounted to $106 million. Interim leadership revenues were up 9% year over year. Physician and leadership search businesses saw revenue growth of 21% year over year.

This figure compares to our Physician and Leadership Solutions segment’s Q3 projection of $172.9 million.

The Technology and Workforce Solutions segment’s revenues totaled $135.1 million, up 34.9% year over year. Language services business revenues came in at $56 million in the quarter (up 18% year over year), while the vendor management systems (VMS) business saw 80% year-over-year revenue growth to reach $60 million.

This figure compares to our Technology and Workforce Solutions segment’s Q3 projection of $129.4 million.

AMN Healthcare Services, Inc. Price, Consensus and EPS Surprise

AMN Healthcare Services, Inc. Price, Consensus and EPS Surprise

AMN Healthcare Services, Inc. price-consensus-eps-surprise-chart | AMN Healthcare Services, Inc. Quote

Margin Trend

In the quarter under review, AMN Healthcare’s gross profit rose 25.9% to $385 million. The gross margin contracted 103 basis points (bps) to 33.8%.

We had projected a 33.3% of gross margin for the third quarter.

Selling, general & administrative expenses rose 23.9% to $215.4 million.

Adjusted operating profit totaled $169.6 million, reflecting a 28.6% uptick from the prior-year quarter. The adjusted operating margin in the third quarter contracted 13 bps to 14.9%.

Financial Position

AMN Healthcare exited the third quarter of 2022 with cash and cash equivalents of $155.7 million compared with $79.4 million at the end of the second quarter. Total debt at the end of third-quarter 2022 was $850 million, which is flat compared with the end of the second quarter.

Cumulative net cash flow provided by operating activities at the end of the third quarter was $538.4 million compared with $227.4 million a year ago.

Guidance

AMN Healthcare has provided its financial outlook for the fourth quarter of 2022.

For the fourth quarter, the company expects revenues to be $1.050 billion-$1.080 billion, reflecting a decline of 21-23% compared with the prior-year figure and down 6-8% sequentially. The Zacks Consensus Estimate for the same stands at $1.05 billion.

Excluding labor disruption revenue, AMN Healthcare’s fourth-quarter revenues are expected to be down 16-18% year over year due to lower average travel nurse and VMS bill rates.

With respect to the Nurse and Allied Solutions segment, the company expects revenues to decline 29% from the prior-year figure. The Technology and Workforce Solutions segment’s revenues are expected to grow 10% from the prior-year figure.

The company projects fourth-quarter revenues at the Physician and Leadership Solutions segment to be flat compared with the prior-year figure.

Our Take

AMN Healthcare exited the third quarter of 2022 with better-than-expected results. The company recorded robust performance across each of its core segments, along with a surge in its top and bottom lines in the quarter. The company witnessed continued robust demand for staffing and other services, raising our optimism. Management confirmed that the company is currently collaborating with various organizations and investing in creating solutions to address labor shortages, which looks promising.

However, AMN Healthcare’s all three segments recorded a sequential decline in revenues in the third quarter, which is disappointing. The contraction of both margins raises our apprehension about the stock. AMN Healthcare expects to register a decline in the majority of its segments in the fourth quarter, which is concerning. The company’s reliance on third parties and operation in a stiff competitive space are other headwinds.

Zacks Rank and Other Key Picks

AMN Healthcare currently carries a Zacks Rank #2 (Buy).

A few other top-ranked stocks in the broader medical space that have announced quarterly results are Elevance Health Inc. ELV, Medpace Holdings, Inc. MEDP and Merit Medical Systems, Inc. MMSI.

Elevance Health, carrying a Zacks Rank #2, reported third-quarter 2022 adjusted EPS of $7.53, which beat the Zacks Consensus Estimate by 6.1%. Revenues of $39.63 billion outpaced the consensus mark by 1.3%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Elevance Health has an estimated long-term growth rate of 12%. ELV’s earnings surpassed estimates in all the trailing four quarters, the average being 4.1%.

Medpace Holdings, sporting a Zacks Rank #1, reported third-quarter 2022 EPS of $2.05, which beat the Zacks Consensus Estimate by 39.5%. Revenues of $383.7 million outpaced the consensus mark by 8.1%.

Medpace Holdings has an estimated growth rate of 44.9% for the full-year 2022. MEDP’s earnings surpassed estimates in all the trailing four quarters, the average being 22%.

Merit Medical, carrying a Zacks Rank #2, reported third-quarter 2022 adjusted EPS of 64 cents, which beat the Zacks Consensus Estimate by 20.8%. Revenues of $287.2 million outpaced the consensus mark by 5.2%.

Merit Medical has an estimated long-term growth rate of 11%. MMSI’s earnings surpassed estimates in all the trailing four quarters, the average being 25.4%.

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