What happened
Investors in consulting specialist Hackett Group (HCKT -2.02%) were seeing red on Wednesday. The stock was down 12% by 2:45 p.m. ET, compared to a slight increase in the S&P 500. The slump put Hackett into negative territory for 2023 although shares are still beating the market over the past full year.
The decline came as Wall Street digested management's fourth-quarter operating update.
So what
Hackett's revenue was $70.1 million in the selling period that ran through late December, the company said before the market opened on Wednesday, or flat year over year. That result surpassed the outlook that executives issued in the third-quarter report. Adjusted earnings also edged past expectations, landing at $0.36 per share compared to $0.56 per share a year earlier.
Hackett booked $294 million of revenue for the full year compared to $279 million in 2021. Operating income rose at a slightly faster pace and was solidly positive.
Now what
Wall Street chose to focus instead on some potential warning signs in the report. CEO Ted Fernandez said macro-economic headwinds became more pronounced in recent months as growth slowed in tech spending.
These pressures were reflected in the company's conservative short-term forecast that calls for sales to fall to $70 million in the first quarter compared to $76 million a year ago. Wall Street had been forecasting a more modest decline to roughly $74 million, and so the stock fell as investors adjusted their expectations.
Slower growth doesn't threaten the long-term investing thesis. In fact, Hackett's strong financial position is allowing it to invest in growth initiatives such as expanding its market intelligence and research advisory services.
A wider portfolio should help it land larger clients while allowing existing contractors to renew at higher rates. The stock may fall further if a recession develops, but to date Hackett appears on track to post another year of solid operating income in 2023.