January 5, 2012
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of financial management services provider Resources Connection (Nasdaq: RECN ) are taking it on the chin today, down 11% following the release of the company's second-quarter results last night.
So what: Resources Connection, whose advisory services should allow the company to clean up in an uncertain economic environment, disappointed on both revenue and earnings. For the quarter, revenue rose 4.7% to $145 million, with international growth clearly leading the way, but still slightly shy of the $145.8 million estimate. Profits came in at $0.11 if you exclude one-time benefits, $0.01 short of what Wall Street had been looking for.
Now what: Brokerage firm William Blair hit it on the head this morning when their cautious statement regarding Resources Connection's earnings claimed the company should have done better. What I see are results that are moving in the correct direction -- revenue, earnings, and cash flow. But I also see a trend of three earnings misses in the past four quarters and weak domestic sales growth. At 16 times forward earnings, I'm simply not seeing enough from Resources Connection to make me want to take a bite, even after today's large move lower.
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