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Insperity (NSP) Stock Falls on Q2 Earnings & Sales Miss
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Shares of Insperity Inc. (NSP - Free Report) plunged 13.4% in yesterday’s trading session after the company reported lower-than-expected second-quarter 2016 numbers.
Adjusted earnings (including stock-based compensation expense) of 36 cents per share fell short of the Zacks Consensus Estimate of 48 cents. Earnings however increased 9.1% on a year-over-year basis.
Insperity’s revenues of $707.3 million increased 12.6% on a year-over-year basis but lagged the Zacks Consensus Estimate of $718 million. The year-over-year growth was driven by a 14% increase in average paid worksite employees and high client retention.
Quarterly Numbers in Details
Insperity’s gross margin in the quarter was down 60 basis points (bps) from the year-ago period to 16%.
The company’s operating expenses increased 6% year over year to $97.2 million. Operating margin was 2.3% compared with 1.9% in the year-ago period.
Insperity exited the quarter with cash, marketable securities and restricted cash of $314.7 million compared with $269.5 million as on Dec 31, 2015.
Guidance
Insperity also provided an outlook for the third quarter and raised its full year 2016 guidance.
For the third quarter of 2016, Insperity projects adjusted earnings in a range of 72 cents to 78 cents a share. Adjusted EBITDA is projected to be $30 million to $32 million and average worksite employees (WSEs) are expected in a range of 170,000 - 170,700, representing growth of 14% to 14.5%.
For full year 2016, the company projects adjusted earnings of $3.50- $3.60 compared with $3.46 - $3.58 a share projected earlier. Adjusted EBITDA is expected to be in the range of $141 million to $145 million. Average WSEs are still expected to be 166,000-168,000, representing growth of 14% -15%.
The company will likely benefit from the booming professional employer organization (PEO) industry, strong client retention and growth in worksite employees in the long run.
However, Insperity has not achieved the desired levels despite increasing average worksite employees (WSEs), which remains a major concern. In addition, a sluggish global macro environment can lead to headcount reductions at client companies. An increase in health care costs does not bode well for Insperity as it is one of the major components of operating expenses. Furthermore, client attrition amid increasing competition from the likes of Automatic Data Processing Inc. (ADP - Free Report) and TriNet Group, Inc. (TNET - Free Report) remain concerns.
Currently, Insperity has a Zacks Rank #3 (Hold). A better-ranked stock in the same space is BG Staffing, Inc. (BGSF - Free Report) , sporting a Zacks Rank #1 (Strong Buy).
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Insperity (NSP) Stock Falls on Q2 Earnings & Sales Miss
Shares of Insperity Inc. (NSP - Free Report) plunged 13.4% in yesterday’s trading session after the company reported lower-than-expected second-quarter 2016 numbers.
Adjusted earnings (including stock-based compensation expense) of 36 cents per share fell short of the Zacks Consensus Estimate of 48 cents. Earnings however increased 9.1% on a year-over-year basis.
Insperity’s revenues of $707.3 million increased 12.6% on a year-over-year basis but lagged the Zacks Consensus Estimate of $718 million. The year-over-year growth was driven by a 14% increase in average paid worksite employees and high client retention.
Quarterly Numbers in Details
Insperity’s gross margin in the quarter was down 60 basis points (bps) from the year-ago period to 16%.
The company’s operating expenses increased 6% year over year to $97.2 million. Operating margin was 2.3% compared with 1.9% in the year-ago period.
Insperity exited the quarter with cash, marketable securities and restricted cash of $314.7 million compared with $269.5 million as on Dec 31, 2015.
Guidance
Insperity also provided an outlook for the third quarter and raised its full year 2016 guidance.
For the third quarter of 2016, Insperity projects adjusted earnings in a range of 72 cents to 78 cents a share. Adjusted EBITDA is projected to be $30 million to $32 million and average worksite employees (WSEs) are expected in a range of 170,000 - 170,700, representing growth of 14% to 14.5%.
For full year 2016, the company projects adjusted earnings of $3.50- $3.60 compared with $3.46 - $3.58 a share projected earlier. Adjusted EBITDA is expected to be in the range of $141 million to $145 million. Average WSEs are still expected to be 166,000-168,000, representing growth of 14% -15%.
INSPERITY INC Price, Consensus and EPS Surprise
INSPERITY INC Price, Consensus and EPS Surprise | INSPERITY INC Quote
Conclusion
The company will likely benefit from the booming professional employer organization (PEO) industry, strong client retention and growth in worksite employees in the long run.
However, Insperity has not achieved the desired levels despite increasing average worksite employees (WSEs), which remains a major concern. In addition, a sluggish global macro environment can lead to headcount reductions at client companies. An increase in health care costs does not bode well for Insperity as it is one of the major components of operating expenses. Furthermore, client attrition amid increasing competition from the likes of Automatic Data Processing Inc. (ADP - Free Report) and TriNet Group, Inc. (TNET - Free Report) remain concerns.
Currently, Insperity has a Zacks Rank #3 (Hold). A better-ranked stock in the same space is BG Staffing, Inc. (BGSF - Free Report) , sporting a Zacks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>