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Why Shares of Insperity Tumbled Today

By Timothy Green - Feb 12, 2020 at 12:21PM

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Declining margins and weak guidance doomed the stock.

What happened

Shares of Insperity (NSP 0.43%) sank on Wednesday after the human resources solutions provider reported its fourth-quarter results. While Insperity beat analyst estimates, a decline in margins and guidance calling for weak earnings sent the stock down 23.4% by 12:45 p.m. EST.

So what

Insperity reported fourth-quarter revenue of $1.08 billion, up 11.2% year over year and $30 million higher than the average analyst estimate. The average number of worksite employees paid per month was up 10%.

A chart showing a drastically declining arrow.

Image source: Getty Images.

Non-GAAP (adjusted) earnings per share (EPS) came in at $0.57, down 17% year over year but $0.02 better than analysts were expecting. Adjusted EBITDA slumped 14% to $40.7 million.

Gross profit rose just 0.2%, while operating expenses were up 4.1%. That led to a 15% decline in operating income. The company pointed to an elevated frequency of large healthcare claims as one reason for the earnings decline.

"[W]e have experienced some unusual and unexpected challenges over the past year," said Insperity CEO Paul Sarvadi. "We have responded decisively and have a plan in place to regain our momentum in growth and profitability as we move through 2020."

Now what

For 2020, Insperity expects average worksite employees paid per month to rise 6% to 8%. Adjusted EPS is expected to be down 10% to flat, while adjusted EBITDA is expected to be flat to up 10%. In the first quarter, the company sees adjusted EPS plunging between 14.1% and 18.7% year over year.

While Insperity beat estimates, deteriorating margins and lackluster guidance tanked the stock.

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Stocks Mentioned

Insperity, Inc. Stock Quote
Insperity, Inc.
NSP
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