Resources Connection Misses on the Top and Bottom Lines

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Resources Connection (NAS: RECN) reported earnings on Jan. 5. Here are the numbers you need to know.

The 10-second takeaway
For the quarter ended Nov. 26 (Q2), Resources Connection missed slightly on revenues and missed on earnings per share.

Compared to the prior-year quarter, revenue grew, and earnings per share grew significantly.

Gross margins contracted, operating margins were steady, net margins grew.

Revenue details
Resources Connection booked revenue of $145 million. The eight analysts polled by S&P Capital IQ predicted a top line of $147 million. Sales were 4.6% higher than the prior-year quarter's $139 million.


Source: S&P Capital IQ. Quarterly periods. Dollar amounts in millions.

EPS details
Non-GAAP EPS came in at $0.11. The nine earnings estimates compiled by S&P Capital IQ predicted $0.12 per share on the same basis. GAAP EPS of $0.58 for Q2 were 53% higher than the prior-year quarter's $0.38 per share.


Source: S&P Capital IQ. Quarterly periods. Figures may be non-GAAP to maintain comparability with estimates.

Margin details
For the quarter, gross margin was 37.9%, 160 basis points worse than the prior-year quarter. Operating margin was 6.4%, about the same as the prior-year quarter. Net margin was 17.5%, 490 basis points better than the prior-year quarter.


Source: S&P Capital IQ. Quarterly periods.

Looking ahead
What does the future hold?

Next quarter's average estimate for revenue is $143 million. On the bottom line, the average EPS estimate is $0.08.

Next year's average estimate for revenue is $580 million. The average EPS estimate is $.40.

Investor Sentiment
The stock has a four-star rating (out of five) at Motley Fool CAPS, with 161 members out of 178 rating the stock outperform, and 18 members rating it underperform. Among 63 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 58 give Resources Connection a green thumbs-up, and five give it a red thumbs-down.

Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on Resources Connection is outperform, with an average price target of $13.44.

At the time this article was published Seth Jayson had no position in any company mentioned here at the time of publication. You can view his stock holdings here. He is co-advisor ofMotley Fool Hidden Gems, which provides new small-cap ideas every month, backed by a real-money portfolio. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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