On Mar 20, we issued an updated research report on AMN Healthcare Services Inc AMN. The company’s soft Locum Tenens Business and a dull 2019 view are concerning factors at the moment.

Shares Down

Over the past year, the Zacks Rank #4 (Sell) stock has declined 16.5% against its industry’s 15.2% rally. The current level is also lower than the S&P 500 index’s 6.4% gain.

Estimates Plummet

For the first quarter, four estimates have moved down over the last 60 days, compared to no movement in the opposite direction. For 2019, five estimates have moved south.

Reflective of this, AMN Healthcare’s current-quarter earnings per share projection plunged 18.6% to 70 cents over the past two months. Meanwhile, current-year earnings per share estimate moved 33.6% to down $2.98 over the same time frame.

AMN Healthcare Services Inc Price and Consensus

AMN Healthcare Services Inc Price and Consensus | AMN Healthcare Services Inc Quote

What’s Deterring the Stock?

In the recently-reported fourth quarter of 2018, Locum Tenens revenues declined 24% to $82 million, far wider than management’s expectation of a 14% fall. Per management, there were larger-than-expected declines in the emergency medicine and hospital specialties due to a drop in demand. Hence, first-quarter 2019 Locum Tenens revenues are expected to deteriorate year over year.

Furthermore, the company expects 2019 organic revenues to decline 6% owing to expectations of lower contributions from the Locum Tenens business. Additionally, Nurse and Allied segment revenues are expected to decline about 1-2% year over year.

Lastly, AMN Healthcare outsources certain critical applications or business processes to external providers, including cloud-based, credentialing and data processing services. Hence, the failure or inability to perform by one or more of these critical suppliers could cause significant disruptions and raise costs for the company.

However, it is encouraging to note that the company’s acquisition of MedPartners has proven accretive in recent times.

Key Picks

A few better-ranked stocks in the broader medical space are Penumbra, Inc. PEN, Veeva Systems VEEV and DexCom. Inc. DXCM. Notably, each of these stocks currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Penumbra’s long-term earnings growth rate is expected at 20.9%.

Veeva Systems’ long-term earnings growth rate is estimated at 14.8%.

DexCom’s next-quarter earnings per share are projected to grow 120%.

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