On Thursday, Goldman Sachs (NYSE:GS) reaffirmed its Buy rating on shares of Korn/Ferry (NYSE:KFY), maintaining a price target of $84.00. The firm anticipates a mixed response from investors to Korn/Ferry's financial results for the second quarter of fiscal year 2025. With a market capitalization of $3.79 billion and an EBITDA of $330 million, the company's earnings per share (EPS) and EBITDA margins met or slightly exceeded consensus expectations.
According to InvestingPro analysis, the stock appears to be trading near its Fair Value, with 12 key insights available to subscribers. However, this was tempered by a modest revenue shortfall and a third-quarter forecast that was slightly below analyst expectations for both revenue and EPS.
Korn/Ferry's total fee revenue saw a year-over-year decline of 5% on a constant currency (CC) basis, a drop that was steeper than the 2% decrease observed in the first quarter. Despite these challenges, InvestingPro data shows the company maintains strong financial health with a current ratio of 2.15, indicating robust liquidity. This was attributed to an uncertain macroeconomic environment.
Nonetheless, new business excluding Recruitment Process Outsourcing (RPO) showed a year-over-year decrease of 1% in the second quarter, which was an improvement from the 2% decline in the first quarter, suggesting early signs of revenue stabilization in the company's talent acquisition businesses.
The company's EBITDA margins expanded significantly year-over-year and surpassed the management's guidance for the quarter. The earnings call is expected to draw investor attention towards trends in new business across Korn/Ferry's various service lines, including executive search, consulting, digital, professional search & interim, and RPO.
Moreover, the overall macroeconomic outlook, the selling environment, success in cross-selling initiatives, and strategies for cost reduction in the current economic climate are likely to be key points of interest.
In other recent news, organizational consulting firm Korn Ferry (NYSE:KFY) has made significant strides in its operations. The company recently completed the acquisition of Trilogy International, a digital talent firm based in the UK.
This move is expected to bolster Korn Ferry's Professional Search & Interim business, leveraging Trilogy's strong market presence and Korn Ferry's global network and digital expertise. The financial details of the acquisition have not been disclosed, but it is expected to contribute immediately to Korn Ferry's adjusted earnings.
In addition, Korn Ferry announced the appointment of Russ Hagey, a former leader at Bain & Company, to its board of directors. With over 40 years of experience in talent management and consulting, Hagey is expected to contribute significantly to the board's strategy and oversight.
In terms of financial developments, Korn Ferry reported robust results for Q1 FY2025, meeting or exceeding company expectations in terms of fee revenue and profitability. The company noted a 36% increase in employee productivity from pre-pandemic levels and an expanded adjusted EBITDA margin.
Looking ahead, Korn Ferry anticipates Q2 fee revenue to be between $655 million and $685 million, with an adjusted EBITDA margin of 6.3% to 16.7% and GAAP diluted earnings per share of $1.11 to $1.23. Despite a decline in Professional Search and interim fee revenues, the company sees signs of stabilization and expects growth in its net consultants across various business segments in the coming year.
Despite the impact of decreased flights to China on its revenue, Korn Ferry remains confident in capturing future growth opportunities, backed by its improved investable cash position of $553 million. These are all recent developments within the company.
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