NEW YORK (AP) -- Shares of Resources Connection dropped Wednesday as the consulting company's quarterly profit and revenue both missed analysts' expectations.
THE SPARK: On Tuesday Resources Connection Inc. reported earnings of 9 cents per share on revenue of $131.7 million for its fiscal first quarter ended Aug. 24. The professional services firm said cautious spending by its clients hurt its performance.
Analysts polled by FactSet expected earnings of 12 cents per share on revenue of $132.6 million.
THE ANALYSIS: Jeffrey Silber of BMO Capital Markets said in a client note that the earnings miss was mostly margin driven, as gross margins dropped by 130 basis points to 37.7 percent partly on higher health care costs. Revenue, which declined 3.8 percent year over year, was stung by weakness in Europe, particularly in France and Norway.
Silber reaffirmed a "Market Perform" rating. He lowered Resources Connection's 2014 earnings estimate to 53 cents from 62 cents per share and reduced its 2015 forecast to 56 cents from 66 cents per share. That's below the average consensus estimate: Analysts expect earnings per share of 62 cents for 2014 and 77 cents for 2015.
A representative for Irvine, Calif.-based Resources Connection Inc. did not immediately respond to an email seeking comment.
SHARE ACTION: Down $1.45, or 10.6 percent, to $12.23 in afternoon trading. The stock has traded in a 52-week range of $10.58 to $13.93. For the year to date, the shares are up 15 percent.