(By Balaseshan) UBS Securities analyst A.J. Rice initiated coverage of Cross Country Healthcare Inc. (NASDAQ:CCRN) with a "Neutral" rating and $4.50 price target.
With $550 million in annual revenue, Cross Country is a leading pure play in medical staffing. The company has a strong presence in nurse and allied travel staffing, physician staffing and clinical trials staffing.
Cross Country's senior management team has been together since the company's IPO in 2001. The company is conservatively managed and financed, with less than $50 million in total debt.
Despite several meaningful acquisitions, CCRN's 2011 revenues were still 27% below their peak in 2003. Since the credit crisis, a number of factors have weighed on the space, such as sluggish patient volumes, the willingness of local nurses to work more shifts, and the decision by many healthcare professionals to postpone retirement.
While the need for hospitals to address "meaningful use criteria" has provided some short-term boost to staffing demand, a definitive turn in the business has been elusive. Rice's price target for CCRN of $4.50 assumes the shares can trade to about 15 times his 2013 EPS estimate over the next year.
While this valuation is well below the company's five-year average of 22 times, the analyst believes it is more reflective of the current industry backdrop that CCRN faces. Also, he noted that his expectations for 2013 EPS assume a healthy rebound in earnings over 2012.
The brokerage established its 2012 EPS estimate for the healthcare staffing services company of $0.16 and its 2013 estimate of $0.31.
CCRN is trading down 3.22% at $4.21 on Wednesday.