Staffing company, Kforce Inc. (KFRC) is scheduled to report its fourth-quarter 2014 results on Feb 10 after the market closes. In the last reported quarter, Kforce posted an earnings surprise of 7.14%. Also, the company experienced a positive average earnings surprise of 5.51%, in trailing four quarters.
Let’s see how things are shaping up for this announcement.
Factors to Consider
Kforce has been witnessing strong growth across its businesses; which is likely to boost its top and bottom lines, going forward too. For the fourth quarter, the company expect revenues from continuing operations in the range of $316 million to $322 million with earnings from continuing operations in the range of 30 cents to 32 cents per share.
The company’s persistent endeavors to broaden the customer base amid a healthy demand environment also augur well for its future prospects. Kforce recently entered into a third amendment to its current credit facility with a syndicate of banks The amended credit facility increases maximum borrowing availability to $170 million, with an accordion feature to increase the capacity by $50 million. As amended, the facility is scheduled to mature in Dec 2019. The refinancing of its credit facility, together with its strong balance sheet and liquidity, provides long-term stability and financial flexibility to Kforce's capital structure. This, in turn, will augment its growth and enhance shareholder’s wealth.
However, the business of the company is subject to government regulations and licensing and the failure to obtain all necessary licenses or approvals could adversely affect Kforce’s financial results. In addition, increased competitive pressure is a cause of concern for the company.
Earnings Whispers
Our proven model does not conclusively show that Kforce will beat earnings estimates in this quarter. This is because a stock needs to have both a positive Earnings ESP (Expected Surprise Prediction) and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. This is not the case here as you will see below.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is pegged at 0.00%. This is because both the Most Accurate Estimate and Zacks Consensus Estimate currently stand at 32 cents.
Zacks Rank: Kforce’s Zacks Rank #3, when combined with a 0.00% ESP, makes surprise prediction difficult. Note that stocks with Zacks Rank #1, #2 and #3 coupled with a positive ESP have a significantly higher chance of beating earnings.
However, we caution against stocks with Zacks Ranks #4 and #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Other Stocks to Consider
Here are some companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat in the imminent future.
Arch Capital Group Ltd. (ACGL), earnings ESP of +0.95% and a Zacks Rank #1
Century Aluminum Co. (CENX), earnings ESP of +7.69% and a Zacks Rank #2.
Alnylam Pharmaceuticals, Inc. (ALNY), earnings ESP of +4.55% and a Zacks Rank #2
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