Davenport Upgrades Heidrick & Struggles (HSII) to Neutral; Raises Estimates

October 28, 2009 12:19 PM EDT

Davenport upgrades Heidrick & Struggles (NASDAQ: HSII) to Neutral.

Davenport analyst says, "Stabilization Continues as Trends Appear to Have Bottomed. Though yr/yr metrics continue to be depressed, management at HSII highlighted several signs of a recent bottom in executive recruitment trends. These include sequential improvements in revenue, productivity (revenue/consultant), and operating profit/margin. On the positive side, management expects a continuation of these trends for the remainder of 2009 and into 2010 as clients move towards more normalized hiring environments. On the negative side, the slope of the nascent recovery is difficult to determine and at least a portion of recent revenue growth appears to be a result of “pent-up” demand due to extremely adverse business conditions over the past 9-12 months. In our view, it remains premature to suggest the trajectory of HSII revenue growth from this point will be continually positive and upward and we believe global hiring may be subdued for some time. With that being said, HSII is clearly on the path of recovery and we believe the company has strong potential over the long-term (management stated a goal for revenue of ~$1.0 billion in 2014). In particular we are encouraged by the progress made thus far within management “Leadership Consulting” initiatives, which currently
represent ~7% or revenue (with long-term goal of ~$200 to $300mm in revenue)."

"Following HSII’s Q3 results we are raising our FY09 Q4 EPS estimate to $0.30 (vs. loss of $0.06 previously) and our FY10 EPS estimate to $1.25 (vs. $0.19 previously)."

To see more analyst ratings on HSII Click Here.

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