Bear of the Day: AMN Healthcare Services (AMN)

AMN Healthcare Services, Inc. AMN is still trying to find a bottom in healthcare staffing. This Zacks Rank #5 (Strong Sell) is expected to see falling earnings again in 2025.AMN Healthcare helps healthcare providers optimize their workforce. AMN total talent solutions include direct staffing, vendor-neutral and managed services programs, clinical and interim healthcare leaders, temporary staffing, permanent placement, executive search, vendor management systems, recruitment process outsourcing, predictive modeling, language services, revenue cycle solutions, and other services.An Aging Population and an Aging Healthcare Workforce CollideIn Jan 2025, AMN Healthcare held an Investor Day where it talked about the outlook for the healthcare workforce and an aging population.According to AMN Healthcare, by 2035, the estimate is that there will be 76 million people age 65 or older. That is up from 58 million in 2022.But the healthcare workforce is also aging at the same time. Currently, about 50% of RNs and physicians are 50+.By 2030, 33% of physicians will be 65+.Globally, by 2030, there is expected to be a 4.5 million shortage of nurses.Additionally, the workforce is on the move. AMN Healthcare said that in the first half of 2024, there was a 28% voluntary turnover among the workforce which was higher than all of pre-pandemic history.This will create opportunities for AMN Healthcare over the next 10 years, along with challenges. But first it must get back to “normalized” level of demand post-pandemic.AMN Healthcare Beats Again in the Third QuarterOn Nov 7, 2024, AMN Healthcare reported its third quarter 2024 results and it beat on earnings again. AMN Healthcare reported $0.61 versus the consensus of $0.58.It has a perfect 5-year earnings surprise track record. That is hard to do in normal circumstances, but that 5-year period still includes the start of the COVID pandemic in 2020.However, the industry was still facing competitive conditions in the third quarter even though earnings were better than expected.It’s total talent solutions continues to be well-received by clients and the average number of services used by top clients increased to approximately 10 in the quarter.Revenue, however, fell 19% to $688 million year-over-year as the company continues to look for a bottom.AMN Healthcare’s largest segment, Nurse and Allied Solutions, fell by 30% to $399 million.  Travel nurse staffing revenue dropped by 37% year-over-year and was also down 12% sequentially, reflecting a dip in demand earlier in the year.There were some bright spots. The Physician and Leadership Solutions segment saw revenue rise 13% year-over-year to $181 million. Language Services revenue was also higher, by 13% year-over-year to $75 million.Analysts Slash AMN Healthcare’s Earnings Estimates AgainIt seemed like 2024 would be the year there would finally be stabilization in AMN Healthcare’s earnings and that they would find a bottom.But the analysts are again cutting earnings estimates.Earnings are expected to fall 62.6% in 2024 to $3.07 from $8.21 in 2023.But 1 estimate has now been lowered in the last 30 days for 2025, pushing the 2025 Zacks Consensus Estimate down to $1.41 from $1.47. But it had been at $3.26 just 90 days ago.That is another earnings decline of 54.2%.Here’s what it looks like on the 5-year price and consensus chart.Image Source: Zacks Investment ResearchAMN Healthcare’s Stock Sinks to New 5-Year LowsWith the earnings still tumbling, so is the stock. Shares are at new 5-year lows.Image Source: Zacks Investment ResearchBut it’s also not cheap. AMN Healthcare still trades with a price-to-earnings (P/E) ratio of 18.1. A P/E ratio of 15 or under usually indicates there is value.AMN Healthcare does not pay a dividend. While it had a strong cash flow from operations in the third quarter of $67 million, it chose to reduce debt by $60 million. Year-to-date through the third quarter, it had repaid $175 million in debt.Given that the analysts are still cutting earnings estimates for 2025, investors interested in this healthcare staffing company might want to wait on the sidelines for stabilization in earnings.Just Released: Zacks Top 10 Stocks for 2025Hurry – you can still get in early on our 10 top tickers for 2025. Handpicked by Zacks Director of Research Sheraz Mian, this portfolio has been stunningly and consistently successful. From inception in 2012 through November, 2024, the Zacks Top 10 Stocks gained +2,112.6%, more than QUADRUPLING the S&P 500’s +475.6%. Sheraz has combed through 4,400 companies covered by the Zacks Rank and handpicked the best 10 to buy and hold in 2025. 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