Korn/Ferry Shares Up on Solid Q3 Earnings - Analyst Blog

Shares of Korn/Ferry International KFY have increased 13.6% since Mar 6, the day it announced solid third quarter fiscal 2014 results. Despite an underperforming economy, this staffing firm has emerged as a winner and constantly helps empower businesses and business leaders to reach their goals. In fact, this Zacks Rank #2 (Buy) stock has reported better-than-expected earnings in the last eight straight quarters.

Korn/Ferry delivered earnings of 43 cents in the third quarter fiscal 2014, which exceeded the Zacks Consensus Estimate of 34 cents by 26.5% and surged 38.7% from the prior-year earnings of 31 cents owing to strong fee revenues and solid margin expansion.

Korn/Ferry's sales increased 18.9% year over year to $250.1 million and also beat the Zacks Consensus Estimate of $232 million by 7.8% riding on a 21% year-over-year increase in fee revenues. Despite the holiday seasonality, the company achieved solid revenues, signaling rising global demand for industry-leading talent management solutions.

Excluding the prior-year acquisitions, fee revenues increased 14% on a constant currency basis on the back of an increase in clients and sourcing leadership and expansion of talent consulting services. The overall fee revenue increase was driven by growth in all the segments - Executive Recruitment, Leadership & Talent Consulting and Futurestep. Additionally, in the third quarter, the company's overall growth continues to outpace many of its industry peers.

The company posted an adjusted operating income of $27.3 million, which increased 68.5% from the prior-year quarter, while operating margin climbed 330 basis points to 11.0% in the third quarter of fiscal 2014 owing to higher sales offsetting higher operating expenses.

Outlook

For the fourth quarter of fiscal 2014, the company expects fee revenues to be in the range of $240 to $250 million and earnings in the range of 35–41 cents per share.

Like Korn/Ferry, another staffing firm Robert Half International Inc. RHI also reported better-than-expected fourth quarter 2013 results on Jan 31, beating the Zacks Consensus Estimate on both earnings and revenues despite macroeconomic headwinds.

Other Stocks to Consider

Other players worth considering in the staffing industry include ManpowerGroup, Inc. MAN and On Assignment Inc. ASGN, both with a Zacks Rank #2.