Robert Half (RHI) drops 10% after EPS

Shares of Robert Half Inc. (NYSE: RHI) dropped 10% Tuesday after the management consulting company posted relatively in-line 4Q results.

RHI reported 4Q EPS $0.01 above the consensus estimate of $0.82, while revenue for the quarter came in at $1.5 billion versus the consensus estimate of $1.47 billion.

However, despite the slight beat, investor focus shifted to the company’s less favorable 1Q guidance.

The outlook for the first quarter was notably weaker than anticipated, with particularly disheartening guidance on margins. RHI is currently navigating challenges in a challenging macro environment marked by low CEO confidence, a softening labor market, employers retaining full-time workers with minimal turnover, and diminishing wage inflation.

RHI guided 1Q EPS at a range of $0.54 to $0.68, 25% below the Street's estimates. This guidance is indicative of a projected sales decline ranging from 10% to 15%, along with anticipated operating margins between 4% and 7%.

Mirroring trends observed in the third quarter, RHI expressed optimism by highlighting the moderation of week-on-week sales declines as an early signal of potential stabilization.

Permanent staffing at RHI experienced a significant decline of 22.6%, and contract-to-hire also saw a decrease of 24% year-over-year. In comparison to 3Q figures of (22.5)% and (29)%, the current declines indicate a somewhat tempered but still notable contraction.

Bank of America (BoA) reiterated their Underperform rating on RHI in a note highlighting that these categories represent higher-margin sales, intensifying the negative impact on overall margins due to the outsized nature of the declines.

“Our Underperform rating reflects our view that sales and earnings will soften against tough comparisons and a weakening GDP outlook.” Wrote BoA analysts in the note.

Shares of RHI are down 1.83% in afternoon trading on Wednesday.

By Michael Elkins | [email protected]

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