Why Is Insperity (NSP) Down 3.8% Since Last Earnings Report?

It has been about a month since the last earnings report for Insperity (NSP). Shares have lost about 3.8% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Insperity due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Insperity Beats on Q1 Earnings, Raises 2019 EPS View

Insperity reported mixed first-quarter 2019 results wherein earnings surpassed the Zacks Consensus Estimate but revenues lagged the same.

Adjusted earnings per share (EPS) of $1.98 cents beat the consensus mark by 10 cents and increased 40.4% year over year on worksite employee growth and effective management of pricing, direct cost programs and operating costs. The reported figure surpassed the guided range of $1.85-$1.91 cents per share.

Total revenues of $1.15 billion however lagged the consensus estimate by $11.7 million but increased 13.7% year over year on the back of 15% increase in average number of worksite employees (WSEEs) paid per month. Average number of worksite employees paid per month was 225,525 at the end of the reported quarter. In the reported quarter, worksite employee growth was driven by new client enrollment on the back of strong sales, higher client retention and net hiring in the company’s client base.

Operating Results       

Gross profit of $226.72 million increased 13.5% from the year-ago quarter on the back of favorable workers’ compensation and benefit cost trends and stronger pricing. Gross margin of 19.7% was flat year over year. Gross profit per worksite employee per month decreased 1.5% year over year to $335.

Adjusted EBITDA was up 21% year over year to $101.44 million. Adjusted EBITDA per worksite employee per month increased 4.9% to $150.

Adjusted operating expenses increased 12.4% year over year to $141.26 million due to continuous investment in growth, technology and product and service offerings. Adjusted operating expenses per worksite employee per month declined 2.3% to $209.

Operating income increased 32.1% year over year to $85.5 million. Operating income per worksite employee per month increased 14.5% to $126.

Balance Sheet & Cash Flow

Insperity exited first-quarter 2019 with adjusted cash, cash equivalents and marketable securities of $140.51 million compared with $128.89 million at the end of the prior quarter. Long- term debt of $144.40 million was flat with the prior quarter.

In first-quarter 2019, Insperity repurchased 230,000 shares for $29 million and paid dividends totaling $12 million.

Guidance

Second-Quarter 2019

For second-quarter 2019, Insperity projects adjusted earnings in the range of 81-86 cents per share, indicating a year-over-year increase of 19-26%. Adjusted EBITDA is anticipated to increase 18-24% to a range of $55-$58 million. Average WSEEs is expected in the range of 232,500 to 234,500, indicating 14-15% growth.

Full-Year 2019

For the full year, Insperity raised its guidance for adjusted EPS and adjusted EBITDA while reaffirming the same for average WSEs. The company now projects adjusted earnings in the band of $4.55-$4.80 per share (indicating growth of 21-28%) compared with the previously guided range of $4.37-$4.69 per share (which indicated growth of 17-25%).

Adjusted EBITDA is now anticipated to grow 15-21% to a range of $276-$289 million compared with the previously guided range of $268-$285 million (which indicated 12-19% growth). Average WSEEs are expected to be in the range of 238,400 to 242,600, indicating 14-16% growth.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month.

VGM Scores

Currently, Insperity has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Insperity has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.

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