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Korn/Ferry International Provides Upbeat Earnings Guidance for Q1 (KFY)

Executive search company, Korn/Ferry International (NYSE: KFY) reported on Monday that its fiscal fourth-quarter income edged up modestly as higher expenses offset revenue growth. Still, shares rallied in aftermarket hours as the firm handed upbeat guidance for the fiscal first quarter.

By Monday’s close, the stock was up 42% in the preceding 12 months.

For the fiscal first quarter, Korn/Ferry International expects earnings to be in the range of 26 cents to 32 cents a share while analysts polled by Thomson Reuters were expecting 28 cents a share.

With employers still reluctant or overcautious to take hiring decisions in the backdrop of macroeconomic uncertainty, firms like Korn/Ferry have felt the pressure on their top line. However, Korn/Ferry’s recent acquisitions have helped offsetting the weakness in the executive search and retention market. The Company recently acquired two leadership development services provider, Global Novations and PDI Ninth House.

Commenting over the results, Korn/Ferry’s Chief Executive Gary D. Burnison said to analysts in a conference call, “I am pleased with our strategic progress and operating results for the fourth quarter, which includes accelerating the integration of our recent acquisitions as well as further diversifying and differentiating our company.”

For the fiscal fourth quarter ended April 30, the Los Angeles-based Company reported net income of $12.2 million compared to a profit of $12 million, in the year-earlier quarter. EPS was unchanged at 25 cents because the Company had more number of shares outstanding in the recently concluded quarter.

Stripping out onetime items such as costs related to restructuring, non-GAAP or adjusted earnings climbed to 32 cents from 28 cents a share.

Revenue soared 15% to $238.6 million. Revenue from fee jumped 15% to $227.9 million; however, revenue excluding the PDI Ninth House and Global Novations acquisitions, rose just 1%.

Earlier in March, the Company provided earnings guidance of 28 cents to 34 cents a share on fee revenue of $210 million to $230 million. Operating margin contracted to 6.8% from 7.8%.

Fee revenue from the firm’s executive search division slipped 0.3% to $136.8 million while it catapulted 90% to $60.1 million at its leadership development and talent consulting division.

Fee revenue from Futurestep, which is Korn/Ferry’s recruitment outsourcing division, climbed 6% to $31 million.


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