Foolish Forecast: Resources Global Tries Again

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Try as we might, it's hard to suppress the memory of Resources Global's (Nasdaq: RECN) earnings miss last quarter. Perhaps Thursday's Q2 2008 report will bring better numbers to help numb the pain. Or perhaps it heralds worse numbers that will make last quarter's pain fade into insignificance for shareholders of this Motley Fool Stock Advisor recommendation.

What analysts say:

• Buy, sell, or waffle? Eleven analysts follow RG, which gets three buy ratings and eight holds.
• Revenues. On average, they're looking for 11% sales growth to $203.5 million.
• Earnings. However, profits are expected to drop by a penny, to $0.28 per share.

What management says:
The only noteworthy news from RG since last quarter's report was November's announcement that the company has hired itself a new chief bean counter. Since the end of that month, Nate Franke, a 22-year veteran of Deloitte & Touche specializing in consumer goods and tech, has been Resources Global's CFO.

What management does:
Good career move, do you think? Well, let's check out RG's numbers, and find out just what Franke has gotten himself into:

Margins	5/06	8/06	11/06	2/07	5/07	8/07
Gross	39.3%	39.4%	39.4%	39.3%	39.2%	38.8%
Operating	15.0%	13.8%	13.2%	12.6%	12.1%	11.6%
Net	9.6%	8.7%	8.2%	7.8%	7.4%	7.2%

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflect trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Basically, Franke's got to fix a year-long stretch of slowly contracting gross margins, compounded by operating and net margins that have been shrinking even longer.

Things aren't quite as miserable as the trend suggests, however. RG's operating margin compares favorably to that of, say, Robert Half (NYSE: RHI), and it's on par with what Motley Fool Inside Value pick Accenture (NYSE: ACN) pulls down. Meanwhile, RG retains a stable of brand-name, well-heeled clients ranging from Charles Schwab (Nasdaq: SCHW) and ConocoPhillips (NYSE: COP) to Southwest (NYSE: LUV) and Tyco (NYSE: TYC). The company also grew its sales 19% year over year for the last six months. Seems to me that if Franke can just stop the bleeding on margins, he should be able to get RG's profits growing nicely once more.

Do Tom Gardner and the lads at Stock Advisor think Franke can get the job done? Read our most recent update on the company here (if you haven't already, you'll need to sign up for a free trial of the service first) and find out what odds they're laying on Franke's success -- and whether you should be betting on him succeeding.

Need more Resources research? Peruse:

• 7 Highly Rated Stocks on Sale
• Resources Connection Falls Short: Fool by Numbers
• Our interview with CEO Donald Murray.

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