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Matt Marquez/MEDILL

Huron's fourth-quarter income remained virtually flat with the year-before period.

Huron stock plunges on Q4 earnings miss, poor 2009 outlook

by Matt Marquez
Feb 24, 2009

Huron Consulting Group Inc. stock plummeted 13 percent Tuesday after the company’s fourth quarter profit fell short of Wall Street expectations and it issued a weak 2009 earnings outlook.

The Chicago-based consulting group earned $11.8 million, or 59 cents per diluted share, for the quarter ended Dec. 31, compared with $11.5 million, or 63 cents per diluted share, for the same period last year. Analysts polled by Zacks Investment Research Inc., a Chicago research firm, expected a profit of 61 cents.

President and CEO Gary Holdren announced earnings guidance for the current year between $3.10 and $3.40. Analysts surveyed by Zacks estimated 2009 profits of $3.56.

Holdren acknowledged in a conference call that economic turmoil had triggered numerous project delays, but he promised that the company would meet its earnings estimate by becoming “profit zealots” and cutting costs line by line.

Revenue for the fourth quarter was $179.8 million, up 22 percent from $147.4 million in the year-ago period.

Huron’s biggest economic victim in the quarter was its accounting and financial consulting division, which handles services for tax reporting and litigation resolution. The division's revenue tumbled 43 percent to $26.5 million, down from $46.7 million in the year-earlier period.

Analyst Kevane Wong of JMP Securities LLC said Huron’s financial consulting struggles are unsurprising given corporations’ financial woes.

“It’s a tough environment for anything litigation-related,” he said, adding that companies embroiled in lawsuits are doing everything they can to avoid paying extra litigation costs, including settling cases.

Huron’s health and education consultation division, on the other hand, enjoyed an 80 percent spike in revenues, rocketing $90.1 million in the quarter from $50 million a year ago.

Holdren called the health and education division one of the company’s bright spots because the economic downturn is pushing previously healthy hospitals to request Huron’s consultation services.

“There are hospitals who would not have called us a year ago” that now need help with their cash flow, Holdren said. He estimated that the health and education division would grow by 20 percent this year and account for 50-55 percent of Huron’s annual revenue.

Tobey Sommer, an analyst with SunTrust Robinson Humphrey Inc., said the magnitude of Huron’s gains surprised him, but not the fact that health care consulting was strong.

“There were some doubters in a poor economic environment, but [health care] lived up to expectations,” he said.

Sommer pointed to Huron’s litigation support service, V3locity, as another potential bright spot because it offers document review services at a discounted, flat rate and could appeal to companies looking for ways to save money.

But Sommer said Huron’s 2009 profit estimate was worrisome. “I didn’t expect 2009’s guidance range to be so low,” he said.

For 2008, net income fell 3 percent to $40.7 million, or $2.13 per diluted share, from $41.9 million, or $2.32 per diluted share, in 2007. Revenues rose 23 percent to $672.2 million from $547.9 million.

Huron closed Tuesday at $40.02, down $6.05 from the previous day’s close of $46.07.