Beaten-Down Cross Country May Be Due for Relief
The exception to a lackluster initial public offering market for the past 18 months was Cross Country (CCNR ), a temporary-nurse-staffing outfit that went public on Oct. 24, 2001. From a debut at 17, the stock jumped 128%, to a high of 38.86 by June, 2002. But investors soured when the Boca Raton (Fla.) company didn't meet revenue expectations. By Dec. 30, shares had fallen to 14. To control costs, hospitals have pared outsourcing. So the upstart's growth has been "more modest than most people had hoped," says analyst Charles Lynch of CIBC World Markets, a co-underwriter of the IPO.
But a nursing shortage persists. The Journal of the American Medical Association says anemic enrollment in nursing schools won't meet the demands of an aging population. Cross Country is the largest U.S. provider of health-care staffing services, serving 3,000 hospitals and other providers. Lynch expects revenue to hit $750 million in 2003, a 19% hike, and EPS to jump to $1.25 from $1.02. A $25 million stock buyback plan was announced on Nov. 4. The stock's p-e ratio is 11 times next year's estimates. "There's a boatload of cash on the books and no debt," says Michael Balkin, manager of the $71.4 million William Blair Small Cap Growth Fund. He put 1% of the fund's assets in the stock last quarter.
By Mara Der Hovanesian