August 5, 2008 / 7:00 PM / 10 years ago

UPDATE 1-Hewitt Associates Q3 results beat Street, ups FY08 view

By Amulya Nagaraj

BANGALORE, Aug 5 (Reuters) - Human resource services company Hewitt Associates HEW.N posted better-than-expected quarterly results, helped by growth at two of its largest segments, and raised its 2008 profit outlook for the second time this year, sending its shares up 14 percent to a lifetime high.

The company, which saw sales growth at its benefits outsourcing and consulting segments, also halved its losses in its human resources business process outsourcing (HR BPO) segment to $16.2 million.

“It is probably right now the most significant improvement because, if you go back over the last 12 months or so, they have lost roughly around 60 cents to 70 cents in EPS in that business (HR BPO),” Stifel Nicolaus analyst Shlomo Rosenbaum said from Baltimore. He has a “hold” rating on the stock.

Various factors including increased profitability of the company’s clients and renegotiation of certain contracts helped cut back losses faster than expected, analyst Mark Marcon of Robert W. Baird said.

He added that company is also benefitting from various legislations like the Pension Protection Act of 2006.

The law helped the company’s retirement consulting business, which forms a little more than a third of Hewitt’s consulting segment. The consulting segment offers services related to retirement and health among others.


The company, whose rivals include Watson Wyatt Inc WW.N and Paychex Inc (PAYX.O), expects financial-year 2008 earnings of $1.90 to $2.00 a share, excluding items, with a high probability of achieving the top end of the range. It had previously expected earnings of $1.85 to $1.95 a share.

Hewitt expects net revenue growth in the mid-to-high single-digit range for the financial year. The company posted revenue of $2.99 billion a year earlier.

Analysts were expecting a profit of $1.91 a share, before items, on revenue of $3.13 billion, for the year.

Separately, Hewitt said it expects to raise $500 million in debt financing later this month, and plans to use the net proceeds for general corporate purposes, including repayment of debt and repurchase of shares.


For the third quarter ended June 30, the company posted net income of $48.2 million, or 48 cents a share, compared with $47.5 million, or 43 cents a share, a year earlier.

Excluding special items, earnings were 53 cents a share. Net revenue rose 7 percent to $794.6 million.

Analysts on average expected earnings of 46 cents a share, before special items, on revenue of $774.1 million, according to Reuters Estimates.

Revenue at the benefits outsourcing and consulting segments rose by 5 percent and 18 percent, respectively.

Shares of the Lincolnshire, Illinois-based company, which touched a life-high of $41.99 earlier in the day, were trading up $4.35 at $41.18 Tuesday afternoon on the New York Stock Exchange. (Additional reporting by Eric Yep; Editing by Pratish Narayanan) ((; within U.S. +1 646 223 8780; outside U.S. +91 80 4135 5800; Reuters Messaging:

    0 : 0
    • narrow-browser-and-phone
    • medium-browser-and-portrait-tablet
    • landscape-tablet
    • medium-wide-browser
    • wide-browser-and-larger
    • medium-browser-and-landscape-tablet
    • medium-wide-browser-and-larger
    • above-phone
    • portrait-tablet-and-above
    • above-portrait-tablet
    • landscape-tablet-and-above
    • landscape-tablet-and-medium-wide-browser
    • portrait-tablet-and-below
    • landscape-tablet-and-below