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Korn/Ferry International (KFY - Free Report) recently delivered solid results for the first quarter of its fiscal 2014 as the company beat the Zacks Consensus Estimate on both the top and bottom lines. It was the company's 6th consecutive positive earnings surprise.

Management also provided bullish guidance for the second quarter, prompting analysts to revise their estimates higher and sending the stock to a Zacks Rank #1 (Strong Buy).

With shares trading at a reasonable 14.5x forward earnings, Korn/Ferry has attractive upside potential.

Korn/Ferry International provides executive search services and leadership consulting and recruitment process outsourcing services around the globe. It is headquartered in Los Angeles and has a market cap of $1.1 billion.

First Quarter Results

Korn/Ferry delivered better-than-expected results for the first quarter of its fiscal 2014 on September 5. Adjusted earnings per share came in at 33 cents, beating the Zacks Consensus Estimate by 3 cents. It was a 50% increase over the same quarter last year.

Fee revenue rose 22% to $228.4 million, ahead of the Zacks Consensus Estimate of $225.0 million. This was due in part to acquisitions, but organic fee revenue was still up a solid 8% on a constant-currency basis. The 'Executive-Recruitment' segment, which accounted for 60% of total revenue, grew 7%.

Meanwhile, operating income jumped 36% year-over-year as the operating margin expanded 110 basis points to 10.2%.

Bullish Guidance

Following strong Q1 results, management at Korn/Ferry provided Q2 EPS guidance of 32-38 cents, which was above the Zacks Consensus Estimate of 31 cents at the time. This prompted analysts to unanimously revise their estimates higher for both 2014 and 2015, sending the stock to a Zacks Rank #1 (Strong Buy).

The Zacks Consensus Estimate for 2014 is now $1.38, up from $1.29 before the Q1 release. The 2015 consensus is currently $1.64, up from $1.50 over the same period.

Based on consensus estimates, analysts are projecting 25% EPS growth this year and 19% EPS growth next year.

Reasonable Valuation

The valuation picture looks reasonable for Korn/Ferry. Shares trade at 14.5x 12-month forward earnings, which is a discount to the industry median of 17.5x. Its price/book ratio of 1.5 is also well below its peers at 2.5.

The Bottom Line

With rising earnings estimates, strong growth projections and reasonable valuation, Korn/Ferry offers investors attractive upside potential.

Todd Bunton, CFA is the Growth & Income Stock Strategist for Zacks Investment Research and Editor of the Income Plus Investor service.

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