First impressions are important in a job interview. They're just not the only thing that a prospective hirer notices.
Shares of 51job (Nasdaq: JOBS) opened 6% higher yesterday after posting seemingly robust quarterly results, but China's popular employment recruiter gave it all back to close slightly lower by the end of the trading day.
It was a blowout quarter by most metrics. Revenue climbed 34% to $45.7 million. Fueled by wider gross, operating, and net margins, earnings soared 44% to $0.35 a share -- or $0.38 a share after backing out one-time stock-based compensation and foreign currency hits. Analysts were only expecting a profit of $0.30 a share on $42.5 million in revenue.
Was the knee-jerk positive reaction undone by uninspiring guidance? Nothing kills a strong quarter like a dreary forecast. That certainly wasn't the case here. 51job's outlook calls for an adjusted profit per ADS of $0.36 to $0.39 on $46.2 million to $47.7 million in revenue. There are no bugaboos there. We're looking at impressive year-over-year growth, and the bottom-line guidance is well above Wall Street's current target.
There are really only two potential explanations for 51job's slip, and only one of them is reasonable.
The unreasonable bearish knock would be that the company's print advertising revenue shrank 20% during the quarter. 51job got its start inserting weekly job listings in regional newspapers, and that number has shrunk from publications in 22 cities to 16 over the past year.
This may seem problematic on the surface, but it's also by design. The old-school publishing tack has already succeeded in growing 51job's online recruitment services. Naturally, this is where the chunkier margins hang out, and this aspect of 51job's business has grown 60% over the past year to account for more than half of its revenue.
There are competitors out there. China Career Builder and Monster's (NYSE: MWW) partly owned ChinaHR.com are respectable rivals. Taobao -- Alibaba's consumer auction marketplace that sent eBay (Nasdaq: EBAY) packing a couple of years ago -- also made headlines when it began offering free employment classifieds last year. However, the healthy growth and widening margins validate the push.
Blaming the share price drop on print malaise is old news. 51job was already down to 16 newspapers three months ago.
This really only leaves us with the stock's buoyant performance leading up to yesterday's report as the only reasonable sell-off catalyst.
51job has been a beast. The stock is up 147% since I recommended it to Rule Breakers newsletter service subscribers this past summer. It's not just an "oh, it's China" thing. Leading online travel portal Ctrip.com (Nasdaq: CTRP) and wireless carrier behemoth China Mobile (NYSE: CHL) have actually lost ground in that time.
A red-hot stock coming in for a breather makes sense. It also didn't help matters that Chinese Premier Wen Jiabao hosed down his country's gross domestic product targets yesterday. Then again, Jiabao's economic growth expectations dropping from 7.5% to 7% seem to come from the same low-balling camp as 51job. China's economy continues to grow at a headier clip than Jiabao suggests, just as 51job routinely trounces its near-term growth projections.
For those who can use a historical refresher, 51job had told investors three months ago that it would earn $0.30 to $0.33 a share in the fourth quarter on an adjusted basis. We all know that it was simply underselling its resume -- the way it probably is now.
Shares of 51job hit an all-time high yesterday before buckling under selling pressure. Something tells me it won't be long before it revisits those highs. It truly nailed this quarterly interview.
