Korn/Ferry International (NYSE: KFY) stock soars on better than expected performance

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Korn/Ferry International (NYSE: KFY) stock rose 13.5% on 13th June 2018 (as of 10:55 AM GMT-4; Source: Google finance)  after the company reported better than expected results for the fourth quarter 2018.

KFY in the fourth quarter of FY 18 has reported the adjusted earnings per share of 80 cents, beating the analysts’ estimates for the adjusted earnings per share of 70 cents. The company had reported the adjusted revenue of $488.4 million in the fourth quarter of FY 18, beating the analysts’ estimates for revenue of $458.38 million. Fee revenue growth in the fourth quarter was partially offset by increased compensation and benefits as well as general and administrative expenses  resulting in operating income and growth in EBITDA.

KFY has declared a quarterly dividend of $0.10 per share on June 12, 2018 payable on July 13, 2018 to stockholders of record on June 26, 2018.

On the other hand, KFY’s Board of Directors has voted for the rebranding plan of the company.  This plan includes going to market under a single, master brand architecture, solely as Korn Ferry and removing of all the company’s sub-brands, including Futurestep, Hay Group and Lominger, among others.  The company is bringing everything under one brand to help accelerate the firm’s positioning as the preeminent organizational consultancy and bring more client awareness to its broad range of talent management solutions.  Further, the Hay Group back office was fully integrated as of the beginning of FY’18 and the company then focused on its integrated go-to-market activities.  This integrated go-to-market approach was a key driver in the 13% fee revenue growth in FY’18, which led to the decision to further integrate the go-to-market activities under one master brand, Korn Ferry.

In the near term KFY will discontinue the use of all sub-brands.  Two of the company’s sub-brands, Hay Group and Lominger came to Korn Ferry through acquisitions.  In connection with the accounting for these acquisitions, $106 million of the purchase price was allocated to indefinite lived tradename intangible assets.  As a result of the decision to discontinue their use, the Company will take a one-time, non-cash intangible asset impairment charge of $106 million, or $79 million on an after-tax basis in Q1 FY’19.

Additionally, for the first quarter of 2019, KFY expect fee revenue to be in the range of $450 million and $470 million and Q1 FY’19 diluted loss per share to range between ($0.74) to ($0.66).

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