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Kforce Inc. Just Missed Earnings And Its EPS Looked Sad - But Analysts Have Updated Their Models

Last week, you might have seen that Kforce Inc. (NASDAQ:KFRC) released its annual result to the market. The early response was not positive, with shares down 9.3% to US$33.62 in the past week. It was not a great result overall. While revenues of US$1.3b were in line with analyst predictions, earnings were less than expected, missing statutory estimates by 10% to hit US$2.29 per share. Earnings are an important time for investors, as they can track a company's performance, look at what top analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. We thought readers would find it interesting to see analysts' latest (statutory) post-earnings forecasts for next year.

See our latest analysis for Kforce

NasdaqGS:KFRC Past and Future Earnings, February 9th 2020
NasdaqGS:KFRC Past and Future Earnings, February 9th 2020

Taking into account the latest results, the latest consensus from Kforce's four analysts is for revenues of US$1.39b in 2020, which would reflect a credible 3.1% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to ascend 14% to US$2.63. Yet prior to the latest earnings, analysts had been forecasting revenues of US$1.41b and earnings per share (EPS) of US$2.76 in 2020. So it looks like there's been a small decline in overall sentiment after the recent results - there's been no major change to revenue estimates, but analysts did make a small dip in their earnings per share forecasts.

Despite cutting their earnings forecasts, analysts have lifted their price target 7.5% to US$38.33, suggesting that these impacts are not expected to weigh on the stock's value in the long term. The consensus price target just an average of individual analyst targets, so - considering that the price target changed, it would be handy to see how wide the range of underlying estimates is. The most optimistic Kforce analyst has a price target of US$42.00 per share, while the most pessimistic values it at US$35.00. Still, with such a tight range of estimates, it suggests analysts have a pretty good idea of what they think the company is worth.

Another way to assess these estimates is by comparing them to past performance, and seeing whether analysts are more or less bullish relative to other companies in the market. It's clear from the latest estimates that Kforce's rate of growth is expected to accelerate meaningfully, with forecast 3.1% revenue growth noticeably faster than its historical growth of 2.3%p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 6.7% per year. So it's clear that despite the acceleration in growth, Kforce is expected to grow meaningfully slower than the market average.

The Bottom Line

The biggest concern with the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Kforce. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Kforce's revenues are expected to perform worse than the wider market. Analysts also upgraded their price target, suggesting that analysts believe the intrinsic value of the business is likely to improve over time.

With that in mind, we wouldn't be too quick to come to a conclusion on Kforce. Long-term earnings power is much more important than next year's profits. We have forecasts for Kforce going out to 2021, and you can see them free on our platform here.

You can also view our analysis of Kforce's balance sheet, and whether we think Kforce is carrying too much debt, for free on our platform here.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.

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