Staffing company Kforce Inc. ( KFRC ) is scheduled to report its third-quarter 2014 results on Oct 28. In the last reported quarter, Kforce posted record revenues and earnings, witnessing a positive earnings surprise of 3.1%. Let's see how things are shaping up for this announcement.
Factors to Consider
The company has been witnessing strong growth across its businesses, and this trend is likely to continue, boosting the top line in the upcoming results. The company's persistent endeavors to broaden the customer base amid a healthy demand environment also augur well for its future prospects. Its organic growth, coupled with healthy operating margin accretion resulting from improved productivity, is expected to positively impact earnings this quarter.
In an effort to streamline its operations, Kforce recently sold its Health Information Management business. This strategic step is expected to enhance the company's focus on its core segments, Technology and Finance & Accounting, serving the commercial and government markets. The proceeds from the sale were used to reduce the company's debt burden, thereby lowering its debt servicing costs. Also, the deal boosted the company's cash balance, which can be used to fund potential acquisitions and finance stock repurchases.
However, tepid economic growth remains a headwind for the company.
For the third quarter, the company expects revenues from continuing operations to come in between $308 million and $314 million, with earnings lying in the range of 26 cents to 29 cents.
Our proven model does not conclusively show that Kforce will beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Ranks #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 28 cents, resulting in Earnings ESP of 0.00%.
Zacks Rank: Kforce currently carries a Zacks Rank #3 (Hold). Though Zacks Ranks #1, 2 or 3 increase the predictive power of ESP, the company's Earnings ESP of 0.00% makes surprise prediction difficult.
We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Other Stocks to Consider
Here are some companies you may want to consider as our model shows that they have the right combination of elements to post an earnings beat this season.
The New York Times Company ( NYT ) has an Earnings ESP of +100.00% and a Zacks Rank #1 (Strong Buy).
Lannett Company, Inc. ( LCI ) has an Earnings ESP of +5.00% and a Zacks Rank #1.
Murphy USA Inc. ( MUSA ) has an Earnings ESP of +20.51% and a Zacks Rank #1.