Insperity Q1 Earnings Beat Ests; Down Y/Y - Analyst Blog
05 Maio 2014 - 10:00AM
Zacks
Insperity Inc.
(NSP) reported first-quarter 2014 earnings of 37 cents per share,
which came ahead of the Zacks Consensus Estimate by a couple of
cents. However, on a year-over-year basis, earnings were down
27.5%.
Quarter Details
Although Insperity’s first-quarter revenues of $636.9 million
increased 4.1% on a year-over-year basis, it lagged the Zacks
Consensus Estimate of $640.0 million. The year-over-year
improvement was attributed to higher average paid worksite
employees (up 2.3%) and higher revenues per worksite employee (up
1.7%). The company reported average client retention of 87.0%
during the quarter. However, net hiring from its clients was
low.
Insperity’s gross margins were down 100 basis points from the
year-ago quarter to 16.7%, primarily due to an increase in benefits
cost center deficit.
The company’s operating expenses increased 4.0% from the year-ago
quarter owing to costs related to training of Business Performance
Advisors, higher technology investments and the reform strategy
regarding healthcare related costs. Operating margins came in at
2.6% compared with 3.6% in the year-ago period, primarily due to
higher operating expenses.
Insperity’s net income decreased from $13.1 million or 51 cents per
share reported in the year-ago quarter to $9.6 million or 37 cents
per share.
Insperity exited the first quarter with cash, marketable securities
and restricted cash of $312.6 million compared with $277.7 million
in the previous quarter. The company has paid dividends of $4.4
million and repurchased shares worth $13.9 million during the
quarter.
Guidance
Insperity expects gross profit per worksite employee per month in
the range of $248–$250 for second quarter 2014 and $254–$257 for
full year 2014. The company expects operating expenses in the range
of $90.2–$91.3 million for the second quarter and $356.5 – $358.5
million for 2014.
For 2014, Insperity expects revenues to be $2.393 billion and
earnings per share in the range of 97 cents to $1.18 (mid-point
$1.01). The Zacks Consensus Estimate for revenues and earnings is
pegged at $2.439 billion and $1.12 per share, respectively.
Conclusion
Insperity provides human resources as well as business solutions to
small and medium business to help them perform better. The company
reported mixed first-quarter results wherein the top line lagged
the Zacks Consensus Estimate, but the bottom line came ahead of the
same. Margins were also impacted by higher-than-expected expenses.
Moreover, the company provided a tepid full year guidance.
Nonetheless, we believe management’s initiatives to expand the
number of Business Performance Advisors and implement a healthcare
reform strategy will be beneficial in the long run. Moreover, the
company’s software-as-a-service and other adjacent business
services are also gaining traction and are expected to improve 2014
results.
A debt-free balance sheet, share repurchases and dividend payouts
are positives, but increasing expenses and competition from
Automatic Data Processing Inc. (ADP),
Paychex Inc. (PAYX) and Manpower Group
Inc. (MAN) are concerns.
Currently, Insperity has a Zacks Rank #4 (Sell).
AUTOMATIC DATA (ADP): Free Stock Analysis Report
MANPOWER INC WI (MAN): Free Stock Analysis Report
INSPERITY INC (NSP): Free Stock Analysis Report
PAYCHEX INC (PAYX): Free Stock Analysis Report
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