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Why The Advisory Board Company Shares Crashed

By Brian Pacampara – Feb 24, 2016 at 2:04PM

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The consulting company seems to be having top-line troubles.

Image source: The Advisory Board.

What: Shares of consulting company The Advisory Board Company (ABCO) were down a whopping 23.4% at 1:05 p.m. ET on Wednesday after its quarterly results and outlook disappointed Wall Street.

So what: Advisory Board stock has slumped in recent months over concerns about slowing demand. A fourth-quarter revenue miss -- $205 million versus the consensus of $207.35 million -- and a downbeat guidance only reinforce those worries. So while its Q4 earnings per share topped the consensus by $0.18 and adjusted EBITDA margin increased significantly to 21.3% from 14.5% in the year-ago period, analysts are being forced to dramatically lower their valuation estimates on seemingly strong top-line headwinds. 

Now what: Management now sees full-year EPS of $1.63-$1.73 on revenue of $810 million-$830 million, versus the consensus of $1.68 and $892.5 million, respectively.


"Looking ahead to 2016, while we expect to see lower revenue growth, the fundamental characteristics of our business remain sound," said Chairman and CEO Robert Musslewhite. "We will draw on our differentiated foundation of insight and best practice, unparalleled technology and analytics platform, deep expertise, and strong relationships across our 5,200 members to continue to drive outsized impact on healthcare and education." When you couple Advisory Board's still-hefty debt load with the significant slowdown in its core business, however, I'd wait for an even wider margin of safety before buying into that turnaround talk. 

Brian Pacampara has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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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