Barrett Business Services Inc.
) reported fourth-quarter 2013 earnings per share (excluding
worker's compensation reserve) of $1.16, which exceeded the Zacks
Consensus Estimate of $1.12 per share. Earnings also improved
from 80 cents in the year-ago quarter.
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Barrett reported gross revenues of $779.3 million in the
fourth-quarter of 2013, up 30.6% from the year-ago quarter.
Quarterly revenues were marginally ahead of the Zacks Consensus
Estimate of $779.0 million. The year-over-year increase was
primarily attributable to continuous increase in the company's
co-employed client count as well as improvement in same-store
Professional employer service fees grew 31.9% year over year to
$742.2 million, primarily driven by new client additions.
Revenues from Staffing Services were $37.1 million, up 9.6% from
the year-ago quarter, primarily attributable to an increase in
new businesses. Staffing business from existing customers
remained flat on a year over year basis.
Barrett's gross margin decreased 61 basis points on a year over
year basis to 3.1% primarily due to a decrease in Direct payroll
cost as a percentage of revenue (25 basis points year over
The company's operating expenses increased 26.9% from the
year-ago quarter to $17.5 million, primarily due to higher
incentive pay and increases in payroll expenses within selling,
general and administrative expenses (SG&A). As a percentage
of revenue operating expenses contracted 6 basis points to 2.3%.
Higher-than-expected operating expenses led to a decline in
operating margin. Operating margin came in at 0.9%, down from
1.4% in the year-ago quarter. Barrett reported net income
(excluding workers' compensation reserve) of $8.7 million or
$1.16 per share compared with $5.8 million or 80 cents in the
Barrett exited the quarter with cash, cash equivalents and
marketable securities of approximately $113.3 million compared
with $42.1 million in the previous quarter. Long-term debt
balance was $5.1 million compared with $5.2 million in the
For the first-quarter of 2014, Barrett expects gross revenue to
increase 24.0% on a year over year basis and range between $735.0
million and $755.0 million. The Zacks Consensus Estimate is
pegged at $761.0 million. Management expects first-quarter 2014
loss to range between 45 cents to 50 cents. The Zacks Consensus
Estimate stands at a loss of 47 cents per share.
Barrett reported better-than-expected fourth-quarter results. The
company's top and bottom line also increased year over year.
Revenues were positively impacted by solid client growth. Despite
the continuing macro uncertainty, Barrett seems positive about
the coming quarter and expects strong business pipeline and a
healthy client base. However, higher effective payroll taxes are
expected to negatively impact Barrett's bottom line in the first
Nontheless, we prefer to wait and see whether the company's
continued investments in operational infrastructure improvements
rationalize margins in the near term. Moreover, growing
) remain headwinds going forward.
Currently, Barrett has a Zacks Rank #4 (Sell).
Western Digital Corporation
) is a better-ranked technology stock carrying a Zacks Rank #2