An aging population and the Affordable Care Act are expected to be long term growth drivers for the healthcare industry over the next few decades. The demand for doctors, nurses, and other medical staff has significantly risen and is expected to continue to rise over the next decade to meet the needs of the American public. One company that is best positioned to take advantage of this trend by having the largest national network of local branch offices in the industry is Cross Country Healthcare (CCRN – Snapshot Report). This is why Cross Country Healthcare is the Zacks Bull of the day.
This Zacks Rank #1 (Strong Buy) is a provider of healthcare staffing services. They also provide staffing of clinical research professionals and allied healthcare professionals, such as radiology technicians, rehabilitation therapists and respiratory therapists. Their staffing operations are complemented by other human capital management services, including search and recruitment, consulting, education and training and resource management services.
According to William Grubbs, President and CEO, “This was another strong quarter for Cross Country Healthcare. We not only exceeded our guidance but we achieved our targeted fourth quarter goal for a 5.0% Adjusted EBITDA margin one quarter ahead of schedule. Our revenue growth, pricing improvement and cost optimization initiatives are all on track and contributed to these results. The favorable market conditions along with the addition of our recently announced acquisition of the Mediscan should further enhance our results.”
In their most recent earnings announcement, revenues rose +4% YoY, consolidated gross profit margins were up 130 basis points YoY, revenues from Nurse and Allied Staffing improved 6% YoY, and at the end of Q3, the company has $24.6 million in cash and cash equivalents on hand. Also, the company acquired healthcare/education staffing company Mediscan, which management expects to be accretive in Q4, and will add $0.06-0.07 to 2016 EPS. This addition will be crucial to management’s expectation of 15-20% growth for the foreseeable future.
Due to their strong Q3 15, management increased Q4 guidance, where they expect adjusted EPS to be in a range of $10.6-11.9 million, above the previously expected $9.9million. Further, revenues are now expected to be in a range of $193-198 million.
As you can see from the table below, Cross Country has been considerably outperforming the S&P 500 over the past several months.
Due to the increased guidance and solid revenue numbers, earnings estimates for Q4 15, FY 15, Q1 16, and FY 16 have increased over the past 30 days. Q4 15 rose from $0.12 to $0.18, FY 15 jumped up from $0.35 to $0.49, Q1 16 improved from $0.08 to $0.12, and FY 16 leaped from $0.48 to $0.65.
After posting a strong Q3 where the company shed their education business and acquired Mediscan, they are now several quarters ahead of where the street expected them to be profitability wise. With increased guidance, and improving margins, this company has cemented itself as a market leader of the healthcare labor market.
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