Please ensure Javascript is enabled for purposes of website accessibility

Here's Why Resources Connection Fell 15% on Thursday

By Lou Whiteman – Apr 4, 2019 at 7:54PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Weakness in Europe offset an otherwise decent quarter.

What happened

Shares of Resources Connection (RGP 0.71%) fell 15.2% on Thursday after the consulting firm reported fiscal third-quarter results that fell short of estimates due to weakness in Europe.

So what

Resources Connection, a former unit of international accounting firm Deloitte, said on April 3 that fiscal third-quarter revenue rose 4.1% year over year, to $179.5 million, and non-GAAP earnings per share, at $0.20, was more than double the $0.09 it earned a year prior. But those results fell short of the two-analyst consensus forecast for $0.21 per share in earnings on sales of $184.2 million.

Two-colored orange arrow pointing down.

Image source: Getty Images.

Company CEO Kate Duchene said Resources Connection faced "macro headwinds" in Europe, where sales were down nearly 10%, or 3.5% in constant currency, but she noted that the U.S. and Asia Pacific regions reported growth of 6% and 4%, respectively. In the U.S., Resource Connection is also dealing with the ramifications of issues including the government shutdown and the potential trade war, which the company says is causing clients in some cases to delay making strategic decisions.

The company's thinly traded shares changed hands on Thursday at about six times their 202,000 per-day average volume.

Now what

Duchene said that despite the European issues, she's pleased with the progress made improving bill rates and expanding the company's product mix toward more profitable solutions offerings. On a call with investors following the release, she said that "90% of our top 50 clients have used more than one type of service or functional expertise, and this penetration reflects the diversity of relationships we continue to build within our clients organization, and reinforces the opportunity for growth."

Management might be optimistic, but the market on Thursday was in no mood to hang around and find out what the next quarter will bring.

Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.