The rule that “what comes up, must come down” applies nearly as universally in the equity markets as it does in gravitational physics. The two large, pure-play publicly traded healthcare staffing companies were reminded of this fact when their Q1 earnings reports failed to excite investors. Following a 27 percent gain in 2013, shares of AMN Healthcare (NYSE: AHS) have now declined 26 percent to this point in 2014. Cross Country Healthcare (NASDAQ: CCRN) has proven an even more volatile investment, as its stock price has given back 41 percent year-to-date on the heels of a 108 percent increase last year.

So, what gives? In short, both companies reported underwhelming results and lackluster forward guidance, citing adverse weather impacts, a brief flu season, a persistence of reimbursement constraints in therapy and generally weak census for the constrained demand.

AMN reported $240.9 million in Q1 revenue (up 4.5 percent year-over-year) and a gross margin of 30.7 percent (up 170bps year-over-year). Gross margins improved across all of the firm’s staffing segments, driven by the integration of the more profitable ShiftWise business, the VMS acquired by AMN in November 2013. Total nursing and allied revenue fell 7.5 percent year-over-year, to $163.5 million, as a 9.4 percent decrease in volume outweighed a slight improvement in bill rate. The song remains the same as that heard throughout 2013 in allied health staffing, with therapy reimbursement issues contributing to a 16 percent year-over-year revenue decline, though imaging and lab specialties were bright spots in the quarter.

Locum tenens revenue was up 2.2 percent year-over-year, to $66.9 million, owing to a 3.5 percent increase in the average bill rate that was partially offset by 1.3 percent lower volume. Gross margin in the physician staffing business expanded by 200bps year-over-year, to 29.9 percent. The higher margins were due in large part to the higher mix of MSP business, which constituted 8 percent of locum revenue in the quarter compared to just 3 percent in 1Q13.

Adjusted EBITDA margin in AMN’s 1Q14 was 8.8 percent, an improvement of 40bps year-over-year and inching closer to the company’s stated goal of 10 percent. Net income was $7.6 million, or $0.16 per share, flat from the year-ago quarter. For Q2, the company expects $244 million to $248 million in revenue (down from $253.9 million 2Q13), gross margin of 30.5 percent and adjusted EBITDA margin at 8.5 percent. While the overall nurse and allied segment revenue is expected to be down by a low- to mid-single digits percentage year-over-year, the company does anticipate a slight sequential increase in allied business, which would be the first in seven consecutive quarters.

Total revenue at Cross Country actually increased 7 percent year-over-year in the first quarter, to $118.1 million. However, the increase was due entirely to the allied health staffing business it purchased from On Assignment in December 2013 for $28.7 million. On an organic basis, revenue was down 2 percent year-over-year. Gross margin contracted by 40bps year-over-year, to 25.8 percent. The newly acquired business added $9.8 million to the nursing and allied division revenue, which totaled $80.2 million, but was down 1 percent year-over-year organically. The company pointed out that it ended the month of March with more travelers in the field than at any point since 2009. Locum tenens revenue was $29.1 million (down 2.2 percent year-over-year), as a decline in volume (down 3 percent year-over-year in days filled) outweighed stronger pricing (up 3 percent year-over-year in average revenue per day). Cross Country said that demand from government customers was a particular weak spot. In terms of locum specialty, declines in emergency medicine and pediatrics were partially offset by increased demand for advanced practitioners.

The company reported adjusted EBITDA of $1 million, a margin of 0.9 percent. Excluding the impacts of a charge for professional liability and audit fees in the period, the adjusted EBITDA margin would have been roughly 2 percent, near the high end of the guidance range. The loss from continuing operations was $0.8 million, or $0.03 per share for 1Q14, compared to a net loss of $1.3 million, or $0.04 in the year-ago quarter. For 2Q14, Cross Country anticipates revenue of $121 to $124 million (up 9-12 percent year-over-year), gross margin of 26.5 percent down 27.0 percent (up 140-190bps) and an adjusted EBITDA margin of 2-3 percent (up 50-150bps).

Both companies cited uncertainty surrounding the implementation of the Affordable Care Act as a near-term demand constraint, causing buyers to remain cautious while visibility into near-term census is limited. However, AMN said that some of its larger clients have suggested that volume is likely to uptick in the second half of 2014 which, along with somewhat easier comparisons to 2H13, may set the stage for a rebound in share prices.