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Q3 Earnings Preview for Kforce (NasdaqGS:KFRC)

in EARNINGS/INVESTING IDEAS by

Kforce Inc. (NasdaqGS:KFRC) is scheduled to report Q3 earnings results on November 2, 2020.

The company is expected to report earnings of $0.83/share on revenue of $363.6 million. The consensus earnings per share (EPS) of $0.83/share is based on a poll of 4 analysts and represents a growth in eps of 22.1% over the same quarter last year, when the company reported earnings of $0.68/share.

The revenue forecast of $363.6 million based on a poll of 4 analysts implies a year-over-year (YoY) growth in revenue of 5.2%. Last year the company reported $345.6 million in revenue for the quarter.

Expected to report EPS growth of 22.1% for Q3, 2020
Metric Expected Prior Year YoY Change
Revenue $363.59 $345.56 5.2%
EPS $0.83 $0.68 22.1%

Earnings Call Trends

Historically, management has exceeded analyst expectations 4 out of the last 8 tracked quarters, missed 2 quarters, and met expectations 2 quarters.

What are your expectations from Kforce Inc. for earnings this quarter? Let us know in the comments!

Analyst Expected vs. Reported EPS
Quarter Expected Reported Surprise Result
Q2, 2020 $0.31 $0.47 51.3% Beat
Q1, 2020 $0.36 $0.42 15.1% Beat
Q4, 2019 $0.67 $0.66 −1.4% Missed
Q3, 2019 $0.67 $0.68 1.6% Beat
Q2, 2019 $0.66 $0.66 0% Met
Q1, 2019 $0.38 $0.38 0.0% Met
Q4, 2018 $0.57 $0.65 14.8% Beat
Q3, 2018 $0.66 $0.64 −2.7% Missed

In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report. After the last earnings report for the period ending June 30, 2020, the stock price reacted by increasing 27.1%.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
August 10, 2020 $30.65 $38.95 27.1% Increase
April 20, 2020 $27.57 $27.88 1.1% Increase
February 5, 2020 $37.37 $34.60 −7.4% Decline
October 30, 2019 $40.01 $40.91 2.2% Increase

The other question to consider is one of earnings manipulation. There is a lot of pressure on management each quarter to deliver on earnings expectations. The Beneish M-Score is a statistical model that provides some insight into whether the company might be manipulating earnings. With a Beneish M-Score of −2.80, the model suggests that the company is not likely to be an earnings manipulator. A value of −2.80 implies a 0.3% chance of earnings manipulation.

Fundamentals And Technical Analysis

Kforce Inc. is currently trading at $36.55/share, down −4.8% for the day. The company is trading at approximately 85.7% of its 52-week high of $42.64/share. The company’s stock price is down −6.2% since the last earnings report and down −2.7% over the previous week.

The company’s 14 Day Relative Price Index (RSI) of 52.91 suggests the company is trading in technically neutral territory. The RSI is considered overbought when above 70 and oversold when below 30.


NasdaqGS:KFRC Stock Price Chart
Source: Finbox

The current share price implies a price-to-earnings (P/E) multiple of 15.34 and a forward P/E multiple of 16.35.

Kforce Inc.’s current share price also implies a price-to-book (P/B) multiple of 4.98. The following table summarizes some other key fundamental ratios:

Data as of October 27, 2020
Metric Value
Last Reported Fiscal Period Key FY2020.Q2
Period End Date June 30, 2020
Stock Price (Current) $36.55
P/E Ratio 15.3x
P/E Ratio (Fwd) 16.3x
PEG Ratio −0.3
Total Debt / Total Capital 13.3%
Levered Free Cash Flow $73.285 million
EV / EBITDA 10.9x

Finbox

Kforce Inc. is a small-cap stock with a market capitalization of $759.6 million and a total enterprise value of $830 million. The company operates in the Industrials sector and the Professional Services industry.

Kforce Inc. provides professional staffing services and solutions in the United States and internationally. It operates through Technology (Tech) and Finance and Accounting (FA) segments. The Tech segment provides temporary staffing and permanent placement services to its clients primarily in the areas of information technology, such as systems/applications architecture and development, business and artificial intelligence, machine learning, network architecture, security, enterprise data, and project management. This segment serves clients in various industries comprising financial and business services, communications, and technology industries. The FA segment offers temporary staffing and permanent placement services to its clients in areas, including general accounting, business and cost analysis, financial analysis and reporting, taxation, budgeting, loan servicing, professional administration, audit services, and systems and controls analysis and documentation. This segment also provides transactional services, which include accounts payable and receivable, billing, payroll, credit and collections, and cash application; decision making services; and operational and technical services. This segment serves clients in various industries, including financial services, healthcare, and manufacturing sectors. Kforce Inc. was founded in 1962 and is headquartered in Tampa, Florida.

Expertise: financial modeling, mergers & acquisitions. Andy is also a founder at finbox.io, where he’s focused on building tools that make it faster and easier for investors to do investment research. Andy’s background is in investment banking where he led the analysis on over 50 board advisory engagements involving mergers and acquisitions, fairness opinions and solvency opinions. Some of his board advisory highlights: - Sears Holdings Corp.’s $620 mm spin-off via rights offering of Sears Outlet, Hometown Stores and Sears Hardware Stores. - Cerberus Capital Management’s $3.3 bn acquisition of SUPERVALU Inc.’s New Albertsons, Inc. assets. Andy can be reached at andy@finbox.io or at +1 (516) 778-6257.

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