What happened

Shares of executive search firm Korn/Ferry (NYSE:KFY) are down a whopping 21.1% (as of 11:35 a.m. EDT) after reporting fiscal Q1 2019 earnings results that may (or may not) have fallen short of expectations. 

On Wall Street, analysts went into earnings looking for Korn/Ferry to report a $0.72 per share profit. Instead, management reported a $0.70 per share loss -- but also a pro-forma profit of $0.78 per share.

Thus, depending on how you look at it, Korn/Ferry may have both missed and beat expectations on Friday, missing badly on its GAAP number, but eking out a respectable beat on pro-forma profits. However, sales came in ahead of estimates, at $478.4 million, so that's good news at least. So why are investors ignoring the good news to focus on the bad?

Man ripping up a contract

Korn/Ferry secures employment contracts for a living. Today, investors ripped theirs up. Image source: Getty Images.

So what

Maybe they're hyper-focused on the bad news because they didn't realize just how bad this quarter's loss would end up being. Although revenue rose 18% year over year, Korn/Ferry took a large charge to earnings based on its decision to "sunset" its several sub-brands and use just "one unified brand" -- Korn Ferry -- to describe itself going forward.

Last quarter, investors absorbed that news with equanimity. This quarter, seeing the effects in dollars and cents -- a big $0.70-per-share loss -- they appear to be having a rethink.

Now what

Might investors change their minds about Korn/Ferry yet again? Perhaps, but it's by no means certain. In updating guidance for the rest of this year, Korn/Ferry management told investors to expect that it will quickly bounce back to book a profit of between $0.73 and $0.81 per share in fiscal Q2 2019, on revenue of between $470 million and $490 million.

On the sales side, the midpoint of that guidance is once again a bit better than what Wall Street has been looking for -- $477 million in Q2 sales. The middle of the range for Korn/Ferry's guided profits, however, is only $0.77, and that is quite a bit below the $0.80 per share that Wall Street had been expecting.

Unless Korn/Ferry can find a way to eke out a bit more profit in Q2 than it's currently promising, investors could sell off this stock once again in three months' time.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.