Korn/Ferry International (NYSE:KFY-Free Report) 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.
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%.
Clean Harbors (NYSE:CLH-Free Report) delivered disappointing second quarter results in August, prompting analysts to revise their estimates significantly lower for both 2013 and 2014. It was also the company's 4th earnings miss in the last 5 quarters.
Despite the poor earnings momentum, shares trade at a premium on a forward P/E basis. Investors should consider avoiding this stock until its earnings momentum improves.
Clean Harbors provides environmental, energy and industrial services throughout North America. It also provides used oil recycling and re-refining, parts washers and environmental services for the small quantity generator market through its Safety-Kleen subsidiary. The company is headquartered in Massachusetts and has a market cap of $3.5 billion.
Clean Harbors reported disappointing second quarter results on August 7. The company reported EPS of 45 cents, which was well below the Zacks Consensus Estimate of 60 cents.
Total revenues came in at $860.5 million, below the consensus of $898.0 million. This shortfall was due in part to flooding in Canada, which affected both its Industrial & Field Services segment and Oil & Gas Field Services segment. The company also sold a lower percentage of blended products in its Oil Re-refining & Recycling segment.
While management stated that it "continue[s] to anticipate a stronger second half of 2013", the company still lowered its revenue and adjusted EBITDA guidance following the Q1 miss. This prompted analysts to revise their estimates significantly lower for both 2013 and 2014, sending the stock to a Zacks Rank #5 (Strong Sell).
Compelling Growth Story for Gallagher
Arthur J Gallagher & Co. (NYSE:AJG-Free Report) has been on an uptrend reflecting investors' enthusiasm about its impressive inorganic growth story. Shares gained almost 28% year–to–date. The insurance broker announced yet another acquisition recently.
Arthur J. Gallagher & Co. acquired New York-based fine arts broker team of Jeffrey Haber and Michael Fischman. With this acquisition, the tally reaches four for the month and six for the current quarter. This also compares favorably with five acquisitions (with annualized revenues totaling $35.9 million) closed in the preceding quarter. The company's strong financial position continues to support the acquisitions.
The acquisition complements the acquirer's product portfolio as the broker team of Haber and Fischman provides retail insurance products and risk management services in the U.S. with specialization in insurance coverage for art galleries and dealers, museums, and high net worth collectors. Moreover, it will also enhance the acquirer's operations in the Northeast Region.
Arthur J. Gallagher & Co. undertakes acquisitions to augment its product and service offerings as well as expand its international exposure. Transactions earlier in September include adding Belmont International based in Kent, England; Eau Claire, Wis.-based R. W. Scobie, Inc.; and London-based Giles Group of Companies (Giles) to its portfolio.
While adding Belmont, provider of retail insurance and employee benefit products and services, will leverage Arthur J Gallagher & Co.'s foothold in southeastern U.K. and also enhance its product portfolio, acquisition of Scobie will augment the company's wholesale network. The Giles acquisition will expand the company's footprint in England and Scotland and help it to make a foray into Northern Ireland, Wales, Isle of Man and the Channel Islands. It will also inflate Arthur J. Gallagher & Co.'s client base in the middle-market and enhance its underwriting footprint via current underwriting business and increased retail distribution opportunities through broker networks.
With respect to earnings performance, Arthur J Gallagher & Co. delivered straight quarters of positive surprise with an average beat of almost 14%. We expect the trend to continue as our proven model shows that Arthur J. Gallagher & Co. has the right combination of positive Earnings ESP and Zacks Rank. Expected Surprise Prediction or ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +5.80%. Arthur J. Gallagher & Co. presently carries a Zacks Rank #3 (Hold).
Arthur J Gallagher & Co. has been witnessing rising earnings estimates, reflecting analysts' confidence on the solid execution of the company. Over the last 30 days, the Zacks Consensus Estimate for 2013 moved north by 0.5% to $2.21 as 4 of 12 estimates were raised. For 2014 also, 4 of 12 estimates moved up pushing the Zacks Consensus Estimate by 1.6% to $2.59.
Among other insurance brokers, in August, Mercer, consulting wing of Marsh & McLennan (NYSE:MMC-Free Report) announced its intention to purchase the pension wind-up operations of PricewaterhouseCoopers (PwC) in Canada, in a bid to expand its operations in the country. Brown & Brown Inc. (NYSE:BRO-Free Report) closed its merger with Beecher Carlson Holdings, Inc. in July.
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