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Why Huron Consulting Group's Shares Plunged Today

By Travis Hoium - Oct 23, 2015 at 1:18PM

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Earnings weren't bad, but investors didn't like anything they saw from Huron's guidance.

What: Shares of Huron Consulting Group ( HURN 0.02% ) plunged a whopping 29% in early trading today after the company reported third-quarter earnings.

So what: Revenue rose 6% to $209.9 million and net income increased 59% to $19.4 million, or $0.86 per share. Adjusted for one-time items, earnings were $1.14 per share, which beat estimates by a penny.  

What disappointed investors most today was management lowering full-year guidance, in part due to a challenging project. Revenue guidance was lowered from $870 million-$900 million to a range of $835 million-$850 million, while GAAP earnings guidance was reduced from $2.75-$2.95 per share down to $2.50-$2.60 per share. 

Now what: The stock market is a forward-looking mechanism, and lowering guidance can often be met with a big backlash. That's exactly what's happening today for Huron Consulting. Even after the drop today, shares trade at 18 times the top end of guidance, and that's not enough value for me to jump in, especially with the guidance downgrade. I'll stay on the sidelines of this stock and wait for operational improvement before considering jumping in.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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