Hewitt Associates (HEW)

Hewitt Associates Inc. is the clear leader in the emerging human resources BPO (business process outsourcing) market. But with the unemployment rate having risen to 6.1% in August, the expected economic weakness should hamper the financial results of employment-related companies such as Hewitt Associates.

The Sell rating is maintained due to expected economic weakness in the next few quarters. Employment service companies generally participate in the later stage of economic recovery.

Since management has been raising EPS guidance for fiscal 2008 based on the company's strong performance, earnings momentum investors have driven the stock to new highs. Any earnings disappointment should result in dramatic stock weakness.

The target price is a 13 P/E multiple on trailing 12 month EPS. Given the minimal expected price appreciation, the stock is rated a Sell.