What happened

Shares of Korn Ferry (NYSE:KFY) were down more than 17% on Friday morning following the executive search company reporting quarterly results. Numbers for the quarter met expectations, but the guidance was reason for concern.

So what

After markets closed Thursday, Korn Ferry reported fiscal fourth-quarter adjusted earnings of $0.88 per share on revenue of $502.5 million. The earnings number was in line with consensus, and the revenue actually beat expectations by about $3 million.

An investor staring in horror at a falling stock chart.

Image source: Getty Images.

Unfortunately, Korn Ferry is not optimistic about the current quarter. The company predicted diluted fiscal first-quarter earnings of between $0.73 and $0.81 per share on revenue of between $466 million and $486 million. Analysts had been expecting $0.80 per share in earnings on revenue of $493 million.

Post-earnings, SunTrust analyst Tobey Sommer lowered his price target on Korn Ferry to $58 from $63, still well above the $40-per-share range at which it traded on Friday. The analyst said sluggish demand in China and among industrial customers was weighing on results but kept his buy rating on the shares.

Now what

This is the second time since September that shares of Korn Ferry have fallen sharply after earnings, and the stock is now down nearly 40% over the past year.

Korn Ferry has been trying to transform away from a simple fee-for-service executive search model and toward more recurring consulting revenue. CEO Gary D. Burnison, during a post-earnings call, expressed confidence the company is on the right track.

As I think about Korn Ferry today, I'm excited about what the future holds. I think, we're really just at the beginning. ... We help companies make sure they have the right people in the right places providing them the right rewards and we bring their strategies to life by redesigning their org structures, helping -- motivate, inspire people, helping them hire the best and hang on to the best. And, today, the right reality is, we're more than talent acquisition, we're more than leadership development, we're more than organizational strategy advisors.

In theory, the shift should make Korn Ferry less subject to the boom-and-bust cycles of executive hiring and M&A, but transformations take time. Investing in Korn Ferry right now requires a good deal of patience.