Categories Analysis, Consumer, Earnings

Resources Connection stock gains sharply after Q2 earnings beat

Shares of Resources Connection (RECN), a provider of diversified consulting services, gained significantly Thursday after the company reported stronger than expected earnings and revenues for the second quarter of 2019.

Net profit moved up to $10.6 million or $0.33 per share from $8.1 million or $0.27 per share in the second quarter of 2018. Earnings surpassed Wall Street estimates. In addition to strong revenue growth, the bottom line also benefitted from a decline in operating expenses, as a percentage of revenue.

Revenues of the Irvine, California-based company climbed 20.5% year-over-year to $188.8 million in the November quarter, beating the street view. Contributing significantly to the overall topline growth, US revenues climbed 24.7%. European revenues and Asia Pacific revenues rose 0.9% and 4.4% respectively.

In addition to strong revenue growth, the bottom line also benefitted from a decline in operating expenses

During the quarter, gross margin improved to 38.9% from 37.9% a year earlier, aided by a better pay-rate to bill-rate ratio and lower costs in the company’s medical program.

“I attribute the improving results to three important changes in our Go To Market efforts — the client service and technical sales teams spend more time in front of clients, we have improved the alignment of our incentive systems to sales growth and velocity in our sales efforts has been delivered by a focused business development team,” said CEO Kate Duchene.

Resources Connection stock gains sharply after Q2 earnings beat

Resources Connection also announced that chief accounting officer John Bower will be retiring in the fourth quarter of the current fiscal year, ending a 20-year stint at the company.

Shares of the company, which closed Thursday’s regular trading session lower, gained about 12% following the earnings announcement.


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