Free Annual Reports
Hewitt Associates Stays Steady
Hewitt Associates (NYSE:HEW) runs an array of human resource and outsourcing businesses that can be counted on for steady profitability and cash flow generation. Unfortunately, recent results and near-term expectations illustrate the overall business is struggling to grow, but this doesn't necessarily negate Hewitt's overall investment appeal.
IN PICTURES: 8 Tips For Starting Your Own Business
Quarterly Review
Revenues fell 6% to $729 million. However, that drop was only 2% when excluding foreign exchange fluctuations and reimbursement revenue that reflects expense reimbursements from client projects in Hewitt's three primary business segments.
Benefits outsourcing represents the largest unit in terms of sales and profits and helps clients more efficiently manage their businesses by providing tools to reduce healthcare and retirement benefit costs. Revenue grew a modest 0.7% to $377.6 million, though operating income improved a healthier 7.6% to account for 26.5% of revenue (up from 24.8% in last year's quarter). Hewitt considers privately-held Fidelity Investments and money-center bank JPMorganChase (NYSE:JPM) primary rivals in this segment.
Outsourcing Decline
The Human Resources Business Process Outsourcing (BPO), a unit that allows clients to outsource human resources functions to Hewitt, reported an 11.7% revenue decline to $115.7 million on negligible quarterly profitability. This represented an improvement from a loss last year.
Consulting giant Accenture (NYSE:ACN) offers similar services, as does the consulting arm of tech titan IBM (NYSE:IBM). These firms also compete with Hewitt's consulting segment, which experienced a 13.8% drop in revenue to $244.3 million. Profits also decreased, falling 7.5% but increased to 12.4% of revenue. Hewitt also competes with consultants Watson Wyatt (NYSE:WW) and Marsh & McLennan's (NYSE:MMC) Mercer in this space.
Reported quarterly earnings advanced 34% to 71 cents per diluted share. This was attributed to share buybacks, strong continued profitability in the flagship outsourcing unit and profit in BPO after a sizeable loss last year. The bottom line results came in ahead of analyst projections and Hewitt also raised full-year guidance by a dime to $2.55 - $2.65 per diluted share. It expects revenue to decline in the low to mid-single digits.
The Bottom Line
At the current share price, Hewitt is trading at a forward P/E of about 13.7. This is at the very bottom of Hewitt's average P/E range since it first sold shares to the public in 2002. Other investment merits include minimal levels of net debt and high annual free cash flow generation which the firm uses to repurchase shares and make acquisitions to supplement organic growth. The only major knock on the company is its anemic top-line trends, though this is somewhat understandable given the difficult economic environment it is operating in today. (For more, check out Earnings Forecasts: A Primer.)
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
IN PICTURES: 8 Tips For Starting Your Own Business
Quarterly Review
Revenues fell 6% to $729 million. However, that drop was only 2% when excluding foreign exchange fluctuations and reimbursement revenue that reflects expense reimbursements from client projects in Hewitt's three primary business segments.
Benefits outsourcing represents the largest unit in terms of sales and profits and helps clients more efficiently manage their businesses by providing tools to reduce healthcare and retirement benefit costs. Revenue grew a modest 0.7% to $377.6 million, though operating income improved a healthier 7.6% to account for 26.5% of revenue (up from 24.8% in last year's quarter). Hewitt considers privately-held Fidelity Investments and money-center bank JPMorganChase (NYSE:JPM) primary rivals in this segment.
Outsourcing Decline
The Human Resources Business Process Outsourcing (BPO), a unit that allows clients to outsource human resources functions to Hewitt, reported an 11.7% revenue decline to $115.7 million on negligible quarterly profitability. This represented an improvement from a loss last year.
Reported quarterly earnings advanced 34% to 71 cents per diluted share. This was attributed to share buybacks, strong continued profitability in the flagship outsourcing unit and profit in BPO after a sizeable loss last year. The bottom line results came in ahead of analyst projections and Hewitt also raised full-year guidance by a dime to $2.55 - $2.65 per diluted share. It expects revenue to decline in the low to mid-single digits.
The Bottom Line
At the current share price, Hewitt is trading at a forward P/E of about 13.7. This is at the very bottom of Hewitt's average P/E range since it first sold shares to the public in 2002. Other investment merits include minimal levels of net debt and high annual free cash flow generation which the firm uses to repurchase shares and make acquisitions to supplement organic growth. The only major knock on the company is its anemic top-line trends, though this is somewhat understandable given the difficult economic environment it is operating in today. (For more, check out Earnings Forecasts: A Primer.)
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
by
Ryan C. Fuhrmann
Ryan C. Fuhrmann, CFA, has a background in portfolio management, overseeing assets for high-net-worth individuals and covering a broad array of industries from a generalist perspective. An active student of investing, he focuses on communicating his ideas as an investment writer and learning from the financial community. Ryan is also actively involved with the CFA Institute. Feel free to visit his website at www.rationalanalyst.com.
Free Annual Reports
