What happened

Shares of Insperity (NSP -0.33%) tumbled on Monday after the provider of human resources and business performance solutions reported its third-quarter results. While revenue wasn't a surprise, the company badly missed analyst estimates for earnings and reduced its guidance for the full year. The stock was down 32.9% at 11:30 a.m. EST.

So what

Insperity reported third-quarter revenue of $1.04 billion, up 12.8% year over year and in line with analyst expectations. This growth was driven by a 12% increase in the average number of work site employees paid per month.

A declining chart.

Image source: Getty Images.

The bottom line was hit by higher-than-expected benefit costs. Non-GAAP (adjusted) earnings per share came in at $0.75, down 22% year over year and $0.26 lower than the average analyst estimate. "While Q3 large medical claim activity in our plan was disappointing, our expectations for long-term trends in sales, pricing and direct costs remain solid," said Insperity CEO Paul Sarvadi in prepared remarks included in the earnings release.

Insperity expects the fourth quarter to also feature a steep earnings decline. Adjusted EPS is expected to be between $0.50 and $0.61, representing a year-over-year decline between 12% and 28%.

Now what

Given the weak earnings performance in the third quarter, Insperity substantially lowered its earnings outlook for the full year. The company now expects to produce adjusted EPS between $4.08 and $4.20, up 9% to 12% from 2018. This compares to a previous outlook of $4.59 to $4.74.

While the company expects double-digit revenue growth to continue into 2020, there was enough bad news to push the stock into free fall.