) recently delivered solid results for the first quarter of its
fiscal 2014 as the company beat the Zacks Consensus Estimate on
both the top and bottom lines. It was the company's 6th consecutive
positive earnings surprise.
Management also provided bullish guidance for the second quarter,
prompting analysts to revise their estimates higher and sending the
stock to a Zacks Rank #1 (Strong Buy).
With shares trading at a reasonable 14.5x forward earnings,
Korn/Ferry has attractive upside potential.
Korn/Ferry International provides executive search services and
leadership consulting and recruitment process outsourcing services
around the globe. It is headquartered in Los Angeles and has a
market cap of $1.1 billion.
First Quarter Results
Korn/Ferry delivered better-than-expected results for the first
quarter of its fiscal 2014 on September 5. Adjusted earnings per
share came in at 33 cents, beating the Zacks Consensus Estimate by
3 cents. It was a 50% increase over the same quarter last year.
Fee revenue rose 22% to $228.4 million, ahead of the Zacks
Consensus Estimate of $225.0 million. This was due in part to
acquisitions, but organic fee revenue was still up a solid 8% on a
constant-currency basis. The 'Executive-Recruitment' segment, which
accounted for 60% of total revenue, grew 7%.
Meanwhile, operating income jumped 36% year-over-year as the
operating margin expanded 110 basis points to 10.2%.
Following strong Q1 results, management at Korn/Ferry provided Q2
EPS guidance of 32-38 cents, which was above the Zacks Consensus
Estimate of 31 cents at the time. This prompted analysts to
unanimously revise their estimates higher for both 2014 and 2015,
sending the stock to a Zacks Rank #1 (Strong Buy).
The Zacks Consensus Estimate for 2014 is now $1.38, up from $1.29
before the Q1 release. The 2015 consensus is currently $1.64, up
from $1.50 over the same period.
Based on consensus estimates, analysts are projecting 25% EPS
growth this year and 19% EPS growth next year.
The valuation picture looks reasonable for Korn/Ferry. Shares trade
at 14.5x 12-month forward earnings, which is a discount to the
industry median of 17.5x. Its price/book ratio of 1.5 is also well
below its peers at 2.5.
The Bottom Line
With rising earnings estimates, strong growth projections and
reasonable valuation, Korn/Ferry offers investors attractive upside
Todd Bunton, CFA is the Growth & Income Stock Strategist
and Editor of the
Income Plus Investor service
KORN/FERRY INTL (KFY): Free Stock Analysis
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