On Thursday, Goldman Sachs (NYSE:GS) reaffirmed its Buy rating on shares of Korn/Ferry (NYSE:KFY) with a steady price target of $79.00. The firm anticipates a generally neutral to positive reaction from investors to the company's first-quarter fiscal year 2025 earnings. Korn/Ferry's revenue, EBITDA margins, and earnings per share (EPS) surpassed consensus expectations. However, the forecast for second-quarter revenue was slightly below consensus, which could temper reactions.
The report highlighted a year-over-year 2% decline in total fee revenue on a constant currency (CC) basis, attributed to the uncertain macroeconomic climate. Nevertheless, this was partly offset by the positive impact of Korn/Ferry's diversified approach and the growing demand for its consulting and digital solutions amid labor market changes.
New business, excluding Recruitment Process Outsourcing (RPO), also saw a 2% year-over-year decrease in the first quarter, marking a continuation of the trend from the fourth quarter of the prior fiscal year. This suggests early signs of revenue stabilization in the company's talent acquisition segments that are sensitive to economic cycles.
The expansion of EBITDA margins year-over-year was noted, which not only beat management's guidance for the quarter but also indicated meaningful growth. In the upcoming earnings call, the focus is expected to be on the trends in new business across Korn/Ferry's various segments, including executive search, consulting, digital, professional search, interim, and RPO.
Moreover, investors are likely to be interested in the broader macroeconomic outlook, the selling environment, the effectiveness of cross-selling efforts, and strategies for cost reduction in the current uncertain economic conditions.
In other recent news, Korn Ferry (NYSE:KFY) reported its fiscal first quarter results, exceeding both earnings and revenue expectations. The company posted adjusted earnings per share of $1.18, surpassing analyst estimates of $1.12. Revenue was reported at $682.8 million, beating the consensus forecast of $664.4 million. However, Korn Ferry's fee revenue declined by 3% year-over-year to $674.9 million, attributed to lower fee revenues in its Professional Search & Interim and RPO segments.
In terms of recent developments, Korn Ferry projected a mixed outlook for the fiscal second quarter. The company anticipates an adjusted EPS between $1.14 and $1.26, compared to analysts' expectations of $1.20. Furthermore, Korn Ferry estimates Q2 revenue to range from $655 million to $685 million, marginally below the consensus estimate of $687.8 million.
Lastly, the company repurchased 351,250 shares for $23.5 million during the quarter and declared a quarterly dividend of $0.37 per share. Korn Ferry's operating margin increased by 320 basis points year-over-year to 11.3%, while its Adjusted EBITDA margin rose by 280 basis points to 16.5%.
InvestingPro Insights
Goldman Sachs' optimistic outlook on Korn/Ferry is complemented by some key financial metrics and insights from InvestingPro. With a market capitalization of $3.63 billion and a Price/Earnings (P/E) ratio of 21.83, Korn/Ferry appears to be valued in line with industry standards. The adjusted P/E ratio for the last twelve months as of Q4 2024 stands at a slightly lower 18.48, indicating a potentially more attractive valuation when considering the company's earnings over the past year.
Investors seeking stability and growth will take note of Korn/Ferry's financial health and shareholder returns. The company's cash position is robust, holding more cash than debt on its balance sheet, which is a reassuring sign of financial strength. Moreover, Korn/Ferry has consistently rewarded investors by raising its dividend for the last three years, with a notable dividend growth of 146.67% over the last twelve months as of Q4 2024. The dividend yield as of the last known date stands at 2.08%, which is competitive within the sector.
From an operational perspective, Korn/Ferry's gross profit margin remains solid at 21.92%, showcasing the company's ability to maintain profitability. It is also worth noting that analysts have revised their earnings estimates upwards for the upcoming period, reflecting a positive sentiment surrounding the company's future performance. For those interested in exploring more about Korn/Ferry's potential, there are additional InvestingPro Tips available, providing deeper insights into the company's financial health and future prospects.
InvestingPro offers a total of 8 additional tips for Korn/Ferry, which can be accessed for further detailed analysis and investment ideas. For investors, these insights could be pivotal in making informed decisions, especially in light of the recent earnings report and Goldman Sachs' reaffirmed Buy rating.
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