COVID-19 will boost demand
There are 3.6M registered nurses in the United States according the Current Population Survey with 1% - 2% classified as "Unemployed and Looking." AMN had 10,462 nurses out on assignment in 4Q19, or 0.20% of the total population. Needless to say, COVID disruption is impacting multiples of AMN's FTE volume. COVID-19 disruption for hospitals and patients has already been profound and seems to fall into a few buckets.
- Replacing staff infected or suspected of being infected for COVID-19
- Nurses unwilling or unable to work due to COVID-19 disruption
- Increased supply of nurses in households under economic pressure and willing to take temporary or travel positions
- ICU and acute care staff required to care for increasing number of hospitalizations and ICU admissions where ICU staffing ratio is 1:2 versus 1:4 in medical-surgical
- Reduced demand from cancellations of elective surgery
- Reduced demand from limitations on patient social distancing
ICU DEMAND IS RISING
Intensive Care Nurse listings number 3,170 and account for 5% of all AMN listings. In Seattle, New York, Boston, and Los Angeles, the number of listings are all ramping significantly higher in March 2019 compared to a more subdued trend nationally. If COVID-19 produces 200,000 ICU admissions, which is low by some counts, and ICU beds are staffed at a ratio of 1:2 staffing, Hospitals will need 100,000 ICU nurses incremental to the current population already caring for non-COVID-19 critical care patients.
POST COVID-19 is likely positive too
Looking forward to the end of the current COVID-19 Pandemic, while a huge positive for the globe and everyone on it, it presents the risk of ebbing demand from crisis levels, and a negative potential headwind for AMN and other staffing companies. Also, we expect Hospital Industry fundamentals to be negatively impacted from the economic consequences of COVID-19 through disruption in the labor pool, declines in the commercially insured population, and the subsequently high margin case volume they account for. However, a substantial amount of demand currently deferred because of COVID-19, should rebound on the other side of the crisis. We expect the environment will present a balance of rebounding procedure volume that has been shut in by the COVID-19 crisis, offset by demand destruction due to the ensuing economic environment and fading COVID-19 emergency staffing.
Valuation
AMN trades above its intermediate multiple ranges leaving only modest upside from here, assuming those ranges stay in tact. For each 500 FTE placements we can add ~18M to the top line and $0.32 in EPS per quarter, and annualized and at the currently multiple, is worth ~$15-$20 per share, or about the move in the shares since the start of 2020. It stands to reason that shares have already captured the annualized COVID-19 impact, although 500 placements does not seem substantially out of whack with the current FTE run rate and demand picture, and the risk would presumably exist to the upside.
Estimates are very likely moving higher as COVID-19 spreads across the United States. Whether this is enough to support the shares on a relative or absolute basis is another question.
