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Wednesday, Apr 24, 2024

On Assignment Staffs Up, Sheds Subsidiary

On Assignment Inc. has been busy this month, acquiring two companies and divesting one business, but analysts aren’t so sure all that activity will add up to much. The Calabasas specialty staffing company announced last week that it completed the $28.7 million sale of its Allied Healthcare Business, which provides professionals for the rehabilitation health care market, to Cross Country Healthcare Inc. of Boca Raton, Fla. It also announced the acquisitions of CyberCoders Holdings Inc., a national permanent-placement recruiting firm in Irvine, for $94 million, and Whitaker Medical, a Houston physician staffing firm, for $17.1 million. Both acquisitions come with earn-out opportunities if the units hit performance milestones. The company’s stock has been on a tear all year, up about 50 percent. But the whirlwind of deals failed to do much. Shares were down 2.21 percent since the Dec. 2 announcements, closing at $33.27 on Dec. 4. It didn’t help that within the announcements there was a downward revision in its revenue guidance for the fourth quarter, mostly due to struggles in its Oxford Global Resources division, which places high-level information technology, engineering and regulatory and compliance professionals. “In my view, the benefits and costs of all this news were fairly neutral,” said Randle Reece, a senior research analyst at Nashville, Tenn. investment firm Avondale Partners LLC. “Even though they gained a lot from the acquisitions and disposing of an underperforming asset, the news on Oxford offsets that.” Apparently the strategy behind the Allied Healthcare unit sale was to unload an underperforming unit that contributed only about 2.5 percent of revenue and put the money to better use. Reece said management decided it would be too difficult to get to achieve fast growth given the dynamics of the health industry. “With the uncertain growth rate and customer base, because of health care reform, customers may become increasingly more stingy,” he said. Chief Executive Peter Dameris said CyberCoders, a business with consistent growth and more to come as the tech industry expands, is a safer bet for On Assignment. “We are constantly evaluating our business mix and service offerings to ensure that we thoroughly understand the ever-changing demand and service delivery trends in the professional staffing industry,” said Dameris, in a statement. The nine brokers who cover the stock give it an average target price of $38.78, a 14 percent premium to its current price, according to Thomson Financial Network. Reece from Avondale has a “market outperform” rating on the stock and a price target of $39. As a result of the acquisitions and struggles with its Oxford division, the company now expects fourth-quarter profit of 31 cents to 33 cents a share on revenue of $418 to $422 million. Wall Street had expected net income of 32 cents on revenue of $432 million, according to Thomson Financial Network.

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