Insperity (NSP) Q4 Earnings Beat, Revenues Miss Estimates

Insperity Inc. (NSP) reported mixed fourth-quarter 2016 numbers with earnings coming ahead of expectations but revenues falling short of the same. Adjusted earnings of 45 cents a share surpassed the Zacks Consensus Estimate of 42 cents.

Insperity Inc. - Earnings Surprise | FindTheBest

Insperity's revenues of $729.1 million increased 12.2% on a year-over-year basis but lagged the Zacks Consensus Estimate of $732.7 million. The year-over-year growth was driven by a 13% increase in average paid worksite employees.

Quarter Details

Insperity's gross margin in the quarter was up 23 basis points (bps) from the year-ago period to 15.16%.

The company's operating expenses increased 10.4% year over year to $96.1 million. Operating margin was 1.98%, up 44 bps from the year-ago quarter.

Insperity exited the quarter with cash, marketable securities and restricted cash of $330.5 million compared with $316.8 million as on Dec 31, 2015.

Insperity, Inc. Price, Consensus and EPS Surprise

Insperity, Inc. Price, Consensus and EPS Surprise | Insperity, Inc. Quote


Insperity also provided an outlook for the first quarter and full year 2017.

For the first quarter of 2017, Insperity projects adjusted earnings in a range of $1.78 to $1.87 a share. Adjusted EBITDA is projected in a range of $63 million to $66 million and average worksite employees (WSEs) are expected in a range of 174,200 to 175,800, representing growth of 10% to 11%.

For full year 2017, the company projects adjusted earnings of $4.21 to $4.42 and adjusted EBITDA in a range of $161 million to $168 million. Average WSEs are expected to be in the 185,000 to 188,000 bracket, representing growth of 11.5% to 13%.

Our Take

The company is well placed to benefit from the booming professional employer organization (PEO) industry, strong client retention and growth in worksite employees in the long run.

However, Insperity has not achieved the desired levels despite increasing average worksite employees (WSEs), which remain a major concern. In addition, a sluggish global macro environment can lead to headcount reductions at client companies. An increase in health care costs does not bode well for Insperity as it is one of the major components of operating expenses. Furthermore, increasing competition from the likes of Automatic Data Processing Inc. ADP and TriNet Group, Inc. TNET remains a concern.

We also note that Insperity's shares have gained 70.00% in the past one year, vastly outperforming the Zacks categorized Staffing industry, which gained 27.95% during that period.

Insperity carries a Zacks Rank #3 (Hold).

A better-ranked stock in the broader tech space is Jabil Circuit Inc. JBL , sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

Jabil has delivered an average positive earnings surprise of 45.61% in the trailing four quarters.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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