Analysis: AMN CCRN

Ahead of its quarterly earnings report after Thursday's market close, AMN Healthcare (AMN) is seeing its shares under pressure. They are getting squeezed, despite the positive data in the latest monthly job openings report and a better-than-expected earnings report from health care staffing company Cross Country Healthcare (CCRN) .

We shared our thoughts on that latest JOLTS report earlier this week, but Cross County reported its quarterly results of $753.6 million in revenue Wednesday night, beating consensus expectations and guiding the current quarter revenue to $605 million-$615 million vs. the $587 million consensus as the contract labor market remains strong.

As John Martin, Cross Country's CEO said on the earnings call last night:

Based on discussions with our clients as well as what has been reported, COVID cases are rising once again, but hospitals are not seeing the same increase in COVID-related hospitalizations and the number of positive cases is slightly far higher than what is reported due to the number of positive home test that are not included in those figures. The takeaway is that the rise in demand we are experiencing is only partly being fueled by COVID needs today versus what we have seen during prior surges. According to a recent study by Yale, COVID seems poised to transition into an endemic. One contributing factor is that 78% of the US population have received at least one dose of the vaccine and 67% are fully vaccinated.

As COVID transitions into more of an endemic, we would expect to see more of a seasonal trend in needs, so much the flu with spikes in demand for respiratory therapists, ICU nurses and emergency room nurses. Though COVID demand will ebb and flow, the effects of pandemic on the healthcare workforce will likely persist. The continued cost pressure faced by healthcare providers is a function of extremely tight labor market and the ongoing struggle that system stays as they try to in core staff levels of missed earn out, fatigue and retirements. The labor shortages in core staff do not appear to ease.

Martin's comments support the ongoing mismatch we identified in the June JOLTS data.

Taking all this together, we expect a favorable earnings report from AMN later Thursday. Consensus expectations are for AMN to earn earnings per share of $2.97 on revenue of $1.37 billion for its June quarter and guide to EPS of $2.00 on revenue of $1.04 billion for its September quarter. That outlook sees the much-anticipated slowdown in revenue for the company as the pandemic eases, but we could see AMN surprise at least somewhat to the upside, given the larger need for contract labor in the health care industry.

AMN is a holding in the AAP.