Barrett Business Services Down to Strong Sell, Shares Fall - Analyst Blog

Zacks Investment Research downgraded Barrett Business Services Inc. BBSI to a Zacks Rank #5 (Strong Sell) on Jun 12, 2014. Also, the company witnessed downward estimate revisions over the past 60 days.

Why the Downgrade?

Following a negative earnings surprise of 2.0% in the last quarter and a tepid current guidance, Barrett Business Services witnessed downward estimate revisions for the second quarter and fiscal 2014 over the past 60 days. Consequently, the Zacks Consensus Estimate for the second quarter declined from $1.01 to 93 cents per share while that for fiscal 2014 declined from $3.17 to $2.96 per share over the same timeframe.

Shares of Barrett Business Services slumped 3.8% on Jun 11, which represented a one-year negative return of 22.2% and a negative year-to-date return of 49.5%.

Barrett Business Services reported dismal first-quarter 2014 results on Apr 29 wherein its loss per share came in wider than both the Zacks Consensus Estimate as well as the year-ago quarter, primarily due to higher effective payroll taxes and a higher share count. Although the company reported a year-over-year increase in revenues, this lagged the Zacks Consensus Estimate.

However, Barrett Business Services has a growing product pipeline that could help it build a healthy client base in the future.

Nonetheless, it's likely that the company's investments in operational infrastructure improvements will continue to impact margins in the near term. The growing competition from Paychex, Inc. PAYX and Insperity, Inc. and macro uncertainty are also headwinds, going forward.

Other Stocks to Consider

Some better-ranked stocks that are worth considering are Micron Technology Inc. MU and SanDisk Corp. SNDK. While Micron sports a Zacks Rank #1 (Strong Buy), SanDisk has a Zacks Rank #2 (Buy).

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