Resources Connection Q3 Profit Beats View, But Revenues Miss

(RTTNews) - Resources Connection Inc (RECN), a provider of consulting and business initiative support services, on Wednesday reported a profit for the third quarter that more than doubled from last year on double-digit revenue growth and higher margins. Earnings per share for the quarter beat analysts' expectations, while revenues missed their estimates.

Tony Cherbak, president and CEO of Resources Global Professionals or RGP, the operating subsidiary of Resources Connection said, "Our increase in net earnings was substantially driven by an improvement in gross margin as well as leveraging our general and administrative expenses over higher revenues. We are pleased with our quarter-over-quarter revenue growth in the U.S. and Asia Pacific and are working hard to improve our operations in Europe."

The Irvine, California-based company's third-quarter net income was $5.99 million or $0.16 per share, up from $2.28 million or $0.06 per share in the same period last year.

On average, four analysts polled by Thomson Reuters expected the company to report earnings of $0.12 per share for the quarter. Analysts' estimates typically exclude special items.

Revenues for the quarter grew 11 percent to $146.83 million from $132.73 million in the prior-year period. Analysts had a consensus revenue estimate of $148.35 million.

The company estimates the revenue impact of the Thanksgiving holiday shift was about $4.0 million. On a pro forma basis, revenue for the latest quarter would have grown 7.6 percent, or 9.8 percent on a constant currency basis, compared to the prior-year quarter.

Revenue in the U.S. increased 17.3 percent from the year-ago period, while International revenue decreased 13.0 percent.

Gross margin for the quarter improved to 37.3 percent from 36 percent in the prior-year period, primarily due to improvement in the bill to pay rate ratio and one less paid holiday in the latest quarter.

RECN closed Wednesday's regular trading at $17.48, up $0.04 or 0.23 percent on a volume of 169,833 shares. However, in after-hours, the stock declined $0.08 or 0.46 percent to $17.40.