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Why Is Insperity (NSP) Down 13.6% Since the Last Earnings Report?
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A month has gone by since the last earnings report for Insperity, Inc. (NSP - Free Report) . Shares have lost about 13.6% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Insperity Misses Q1 Earnings & Revenue Estimates
Insperity reported disappointing first-quarter 2017 numbers with both earnings and revenues lagging expectations. Adjusted earnings (including stock-based compensation) of $1.69 a share missed the Zacks Consensus Estimate by a penny but increased 10.5% from the year-ago quarter.
The earnings per share figure also missed the company’s guided range of $1.78–$1.87 a share.
Revenues of $882.7 million increased 10% on a year-over-year basis but lagged the Zacks Consensus Estimate of $886 million. The year-over-year growth was driven by 10% increase in average paid worksite employees. Revenues per worksite employee per month remained almost flat at $1,687.
Management stated that client attrition of 8.3% was significantly below the company’s historical first-quarter levels of 10–12%, for the third consecutive year. However, net hiring of worksite employees by clients was 30% lower than the year-ago quarter.
Quarter Details
Gross margin contracted 60 basis points (bps) on a year-over-year basis to 18.7% in the quarter.
Adjusted EBITDA increased 2.5% year over year to $62.7 million, which was within management’s guided range of $63–$66 million. EBITDA per worksite employee per month declined 8.3% in the quarter.
Insperity’s operating expenses increased 9.2% year over year to $105.9 million, reflecting a 13% increase in the number of total business performance advisors, and continuing investments in the company’s technology infrastructure, security and development.
As percentage of revenues, operating expenses decreased 10 bps from the year-ago quarter to 12%, primarily owing to operating leverage and budget savings. Operating expense per worksite employee per month declined from $204 in the year-ago quarter to $202 in the reported quarter. Non-bonus payroll cost per worksite employee per month increased 0.5% to $6,725.
As a result, operating margin contracted almost 50 bps from the year-ago quarter to 6.1%. Operating income per worksite employee per month plunged 8.9% on a year-over-year basis to $102.
Insperity exited the quarter with cash, marketable securities and restricted cash of $348.1 million compared with $330.5 million as on Dec 31, 2016.
Insperity bought back 114,568 shares for $9.3 million and paid dividends totaling $5.3 million. The company increased quarterly dividend payout rate by 20% from $0.25 per share to $0.30 per share.
Guidance
For second-quarter 2017, Insperity projects adjusted earnings in a range of $0.65–$0.71 per share. Adjusted EBITDA is projected in a range of $27–$29 million. Insperity now forecasts average paid worksite employees growth in the range of 9.5–10.5%.
Insperity raised EPS guidance for full-year 2017. The company now projects adjusted EPS of $4.30 to $4.44, up from previous guidance of $4.21 to $4.42. The range reflects growth of 20–24% over 2016.
Adjusted EBITDA range was narrowed to $162–$166 million as compared with previous guidance of $161–$168 million.
Insperity now forecasts average paid worksite employees growth in the range of 11–12%, which is near the low end of initial guidance, primarily due to ongoing weakness in net hiring by clients and a slight shift in the timing of enrolment of two large midmarket accounts.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There have been four revisions lower for the current quarter. In the past month, the consensus estimate has shifted downward by 9.4% due to these changes.
At this time, the stock has a great Growth Score of 'A', though it is lagging a lot on the momentum front with a 'C'. However, the stock was allocated a grade of 'A' on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'A'. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is more suitable for value and growth investors than momentum investors.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Notably, the stock has a Zacks Rank #3 (Hold). We are looking for an inline return from the stock in the next few months.
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Why Is Insperity (NSP) Down 13.6% Since the Last Earnings Report?
A month has gone by since the last earnings report for Insperity, Inc. (NSP - Free Report) . Shares have lost about 13.6% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Insperity Misses Q1 Earnings & Revenue Estimates
Insperity reported disappointing first-quarter 2017 numbers with both earnings and revenues lagging expectations. Adjusted earnings (including stock-based compensation) of $1.69 a share missed the Zacks Consensus Estimate by a penny but increased 10.5% from the year-ago quarter.
The earnings per share figure also missed the company’s guided range of $1.78–$1.87 a share.
Revenues of $882.7 million increased 10% on a year-over-year basis but lagged the Zacks Consensus Estimate of $886 million. The year-over-year growth was driven by 10% increase in average paid worksite employees. Revenues per worksite employee per month remained almost flat at $1,687.
Management stated that client attrition of 8.3% was significantly below the company’s historical first-quarter levels of 10–12%, for the third consecutive year. However, net hiring of worksite employees by clients was 30% lower than the year-ago quarter.
Quarter Details
Gross margin contracted 60 basis points (bps) on a year-over-year basis to 18.7% in the quarter.
Adjusted EBITDA increased 2.5% year over year to $62.7 million, which was within management’s guided range of $63–$66 million. EBITDA per worksite employee per month declined 8.3% in the quarter.
Insperity’s operating expenses increased 9.2% year over year to $105.9 million, reflecting a 13% increase in the number of total business performance advisors, and continuing investments in the company’s technology infrastructure, security and development.
As percentage of revenues, operating expenses decreased 10 bps from the year-ago quarter to 12%, primarily owing to operating leverage and budget savings. Operating expense per worksite employee per month declined from $204 in the year-ago quarter to $202 in the reported quarter. Non-bonus payroll cost per worksite employee per month increased 0.5% to $6,725.
As a result, operating margin contracted almost 50 bps from the year-ago quarter to 6.1%. Operating income per worksite employee per month plunged 8.9% on a year-over-year basis to $102.
Insperity exited the quarter with cash, marketable securities and restricted cash of $348.1 million compared with $330.5 million as on Dec 31, 2016.
Insperity bought back 114,568 shares for $9.3 million and paid dividends totaling $5.3 million. The company increased quarterly dividend payout rate by 20% from $0.25 per share to $0.30 per share.
Guidance
For second-quarter 2017, Insperity projects adjusted earnings in a range of $0.65–$0.71 per share. Adjusted EBITDA is projected in a range of $27–$29 million. Insperity now forecasts average paid worksite employees growth in the range of 9.5–10.5%.
Insperity raised EPS guidance for full-year 2017. The company now projects adjusted EPS of $4.30 to $4.44, up from previous guidance of $4.21 to $4.42. The range reflects growth of 20–24% over 2016.
Adjusted EBITDA range was narrowed to $162–$166 million as compared with previous guidance of $161–$168 million.
Insperity now forecasts average paid worksite employees growth in the range of 11–12%, which is near the low end of initial guidance, primarily due to ongoing weakness in net hiring by clients and a slight shift in the timing of enrolment of two large midmarket accounts.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There have been four revisions lower for the current quarter. In the past month, the consensus estimate has shifted downward by 9.4% due to these changes.
Insperity, Inc. Price and Consensus
Insperity, Inc. Price and Consensus | Insperity, Inc. Quote
VGM Scores
At this time, the stock has a great Growth Score of 'A', though it is lagging a lot on the momentum front with a 'C'. However, the stock was allocated a grade of 'A' on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'A'. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is more suitable for value and growth investors than momentum investors.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Notably, the stock has a Zacks Rank #3 (Hold). We are looking for an inline return from the stock in the next few months.