Professional staffing solutions provider Kforce (NASDAQ:KFRC) stock has been trying to break three-year highs on the acceleration of the post-pandemic economic recovery. Shares are tracking the benchmark S&P 500 index. The stay-at-home restrictions mandated during the COVID-19 crisis accelerated the need for companies to outsource parts of their workforce which is a boon for the Company. Certain business and lifestyle trends brought on by the pandemic are here to stay such as e-commerce, digital transformation, remote work/learning/play, and telemedicine even as the recovery continues. Information technology (IT) and finance professionals are the sweet spots of the recovery, combined with the “virtual work” trend, generate strong tailwinds that should continue to drive Kforce shares higher. Prudent investors seeking exposure in the acceleration of the “new normal” workforce, can monitor for opportunistic pullback levels on Kforce shares to scale into a position.
Q3 FY 2020 Earnings Release
On Nov. 2, 2020, Kforce released its fiscal third-quarter 2020 results for the quarter ending September 2020. The Company reported an earnings-per-share (EPS) profit of $0.89 excluding non-recurring items versus consensus analyst estimates for a profit of $0.83, a $0.06 beat. Revenues grew 5.7% year-over-year (YoY) to $365.4 million beating analyst estimates for $349.84 million. The Company raised its forward guidance for Q4 EPS coming in between $0.70 to $0.78 versus $0.61 consensus analyst estimates. Revenues for Q4 are expected to come in between $337 million to $347 million compared to $339.85 million with gross profit margins between 28.1% versus 28.3% and the operating margin between 6.2% and 6.6%.
Conference Call Takeaways
Kforce CEO, David Dunkel, summarized:
“The pandemic has exponentially accelerated the pace of this technical revolution. We believe these macro and secular trends play to the heart and position of Kforce. The demand for our services and resilience of our revenue stream during the pandemic is a testament to the longer-term strategic decisions we made to focus on addressing client needs driven by these trends.”
The Company experienced 2% sequential growth in the Technology segment (80%) of revenues as it continues to capture market share. The “virtual work” environment plays to the core of Kforce services. “Our people have successfully tacked a sudden shift to working fully remotely, many juggling family responsibilities during the school year in the spring and now here in the fall, while still driving success for our firm.”, stated Dunkel.
Recovery Trends
Kforce CFO, Joe Liberatore, noted the Company started to see mild growth in billable headcount in early June continuing to accelerate through October, reflecting the growing confidence of clients to restart projects and seeking resources for key initiatives, which Kforce can accommodate. This was evidenced by the average new assignment started hitting 95% of the previous year's levels, but the average bill rate grew 4.6% YoY. As the stock market epicenter industries like travel and leisure, retail and hospitality were still below pre-pandemic levels. Financial services, insurance, and telecom were resilient throughout the pandemic and grew sequentially. Technology-driven mission-critical assignment are seeing the most acceleration. Liberatore summed it up, “Our experience has been that recessionary cycles result in a competitive advantage for the strongest companies and we believe we are ideally situated to take advantage of the market as conditions continue to recover in what we believe could be an accelerated digitally-led expansion.”
Q4 2020 Raised Guidance
On Jan. 19, 2021, Kforce provided another upside guidance revision for Q4 2020. The Company raised Q4 2021 EPS guidance to $0.78 versus $0.75 consensus analyst estimates. Revenues are expected to exceed $347 million compared to the $342.21 million consensus analyst estimates. Kforce is experiencing a multiple expansion on accelerated recovery tailwinds. Opportunistic pullback levels should be monitored closely for investors seeking exposure.
KFRC Opportunistic Pullback Levels
Using the rifle charts on the monthly and weekly time frames provide a broader view of the price action playing field for KFRC stock. The monthly rifle chart peaked near the $45.86 Fibonacci (fib) level. The sharp pullback is forming a potential shooting star with a rising 5-period moving average (MA) support at the $38.58 fib. The monthly mini pup is nearing the 80-band. The weekly rifle chart formed a market structure low (MSL) buy trigger above $36.41. The weekly stochastic peaked and crossed down with a bearish mini inverse pup as shares fell under the weekly 5-period MA at $43.45. If the weekly mini inverse pup cracks the 80-band down, then prudent investors can watch for opportunistic pullback levels at the $41.12 fib, $38.58 monthly 5-period MA/fib, $33.83 fib, and the $32.11 fib. The upside trajectories range from the $49.41 stinky 5s level up towards the $61.48 fib.