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 staffing specialist Kelly Services
So what: The Kelly carnage came after the company revealed fourth-quarter results. And the funny thing was that, at least on the surface, the numbers looked pretty darn good. Revenue of $1.4 billion for the quarter was ever so slightly below the $1.41 billion that analysts had estimated. However, earnings per share of $0.64 absolutely crushed the $0.42 that Wall Street was looking for.
So why the big drop? A good possibility is that investors were reacting to a downgrade from an analyst at SunTrust, who knocked the stock down from buy to neutral. Another possibility is that investors weren't stoked about the quality of Kelly's earnings. Though earnings per share were well above expectations, that outperformance was driven in large part by a big tax benefit. Operating earnings actually fell 25% year over year. That said, based on analyst EBITDA estimates provided by S&P Capital IQ, it does appear that analysts were anticipating a drop EBITDA for the quarter.
Now what: What can I really say? Employment is a big issue for the entire country, but it's unclear how that will shake out in the year ahead. If companies do start feeling more sanguine about hiring, the year ahead could be pretty darn bright for Kelly.
In the near term, I think there may be a bounceback ahead for Kelly shareholders. Unless there's something I've completely missed, the massive sell-off today seems completely overdone.
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