Volatile stock to watch: Korn Ferry (NYSE: KFY)

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Korn Ferry (NYSE: KFY) stock fell over 1.7% on December 6th, 2019 (Source: Investing.com) after the company posted mixed results for second quarter of FY 20. KFY has reported the net income attributable to Korn Ferry of $42.8 million in Q2 FY’20 as compared to $46.0 million in Q2 FY’19.  The decline in net income attributable to Korn Ferry is due to a decrease in fee revenue and an increase in general and administrative expenses. Despite the confused socio-political climate, the company has continued to have a long-term balanced approach to capital deployment, had acquired three leadership development companies, repurchased almost $50 million of stock during the quarter in addition to the normal quarterly dividend. The stock saw a recovery of its Friday losses and generated over 1.8% on December 9th, 2019 (As of 11:12:37; Source: Investing.com)

KFY in the second quarter of FY 20 has reported the adjusted earnings per share of 81 cents, beating the analysts’ estimates for the adjusted earnings per share of 80 cents, according to the Zacks Consensus Estimate. The company had reported 1 percent fall in the adjusted revenue to $492.39 million in the second quarter of FY 20, missing the analysts’ estimates for revenue by 0.53%. Fee revenue was $492.4 million in Q2 FY’20, a decrease of 1% (1% increase on a constant currency basis) compared to Q2 FY’19.  The decrease in fee revenue was due to lower fee revenue in Executive Search and Advisory, partially offset by growth in RPO and Professional Search.

Moreover, the company delivered the operating margin of 12.6% in Q2 FY’20 compared to 14.3% in the year-ago quarter.  The decline in operating margin was mainly due an increase in general and administrative expenses and lower fee revenue. Adjusted EBITDA margin has decreased to 15.9%, compared to 16.2% in the year-ago quarter.

Additionally, for Selected Advisory Data, the company has posted Adjusted EBITDA of $37.0 million in Q2 FY’20 and an Adjusted EBITDA margin of 17.6% compared to $39.4 million and 18.2%, respectively, in the year-ago quarter. For Selected Executive Search Data, the company has posted the EBITDA of $44 million in Q2 FY’20 with an EBITDA margin of 23.4% compared to $49.2 million and 24.9%, respectively, in the year-ago quarter, mainly due to a decline in fee revenue.

For the third quarter FY’20, the fee revenue is expected to be in the range of $490 million and $510 million and the diluted earnings per share is expected to be in the range of $0.35 to $0.52. On a consolidated adjusted basis, the company expects the adjusted diluted earnings per share to be in the range from $0.70 to $0.78 for the third quarter 2020.

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