What: Shares of consulting company The Advisory Board Company (NASDAQ:ABCO) were down more than 19% near the end of the trading day Wednesday after its quarterly results and outlook disappointed Wall Street.
So What: Advisory Board shares have risen sharply in recent months on optimism coming into the quarter, but disappointing Q3 revenue -- $184.7 million versus the consensus of $192.6 million -- coupled with downbeat full-year guidance is forcing analysts to quickly recalibrate their growth estimates. So while Advisory Board's adjusted EPS of $0.40 easily topped Wall Street's estimate of just $0.33, investors seem skeptical that demand will remain robust enough to fuel further appreciation.
Now What: Management now sees full-year EPS in the range of $1.30-$1.37 on revenue of $780 million-$790 million, both narrowed from its prior view of $1.30-$1.43 and $780 million-$800 million, respectively. "As always, our focus on member impact drives our success, and we continue to deliver strong returns to each of our members and to the broader healthcare and higher education industries," said Chairman and CEO Robert Musslewhite. "Our 5,200 members regularly affirm that, and the 93% member renewal rate we earned this year, the highest in our history, is a testament to the positive impact our work has on their most pressing issues." Of course, when you couple Advisory Board's historically low returns on capital with its still-lofty forward P/E of 30, I wouldn't buy too heavily into that bullishness.
Brian Pacampara has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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