Organizational consulting firm Korn Ferry (NYSE:KFY) reported Q4 CY2024 results exceeding the market’s revenue expectations, but sales were flat year on year at $676.5 million. On the other hand, next quarter’s revenue guidance of $690 million was less impressive, coming in 1.7% below analysts’ estimates. Its non-GAAP profit of $1.19 per share was 5.4% above analysts’ consensus estimates.
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Korn Ferry (KFY) Q4 CY2024 Highlights:
- Revenue: $676.5 million vs analyst estimates of $658.1 million (flat year on year, 2.8% beat)
- Adjusted EPS: $1.19 vs analyst estimates of $1.13 (5.4% beat)
- Adjusted EBITDA: $114.5 million vs analyst estimates of $109.9 million (16.9% margin, 4.2% beat)
- Revenue Guidance for Q1 CY2025 is $690 million at the midpoint, below analyst estimates of $701.9 million
- Adjusted EPS guidance for Q1 CY2025 is $1.26 at the midpoint, above analyst estimates of $1.23
- Operating Margin: 11.6%, up from 7.4% in the same quarter last year
- Market Capitalization: $3.22 billion
Company Overview
Founded in 1969 and working with 97% of the S&P 100 companies, Korn Ferry (NYSE:KFY) is a global organizational consulting firm that helps companies design optimal structures, recruit talent, develop leaders, and create effective compensation strategies.
Professional Staffing & HR Solutions
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Sales Growth
Examining a company’s long-term performance can provide clues about its quality. Any business can have short-term success, but a top-tier one grows for years.
With $2.74 billion in revenue over the past 12 months, Korn Ferry is a mid-sized business services company, which sometimes brings disadvantages compared to larger competitors benefiting from better economies of scale. On the bright side, it can still flex high growth rates because it’s working from a smaller revenue base.
As you can see below, Korn Ferry grew its sales at a decent 6.2% compounded annual growth rate over the last five years. This shows its offerings generated slightly more demand than the average business services company, a useful starting point for our analysis.
Long-term growth is the most important, but within business services, a half-decade historical view may miss new innovations or demand cycles. Korn Ferry’s recent history marks a sharp pivot from its five-year trend as its revenue has shown annualized declines of 2% over the last two years. 
This quarter, Korn Ferry’s $676.5 million of revenue was flat year on year but beat Wall Street’s estimates by 2.8%. Company management is currently guiding for a 1.4% year-on-year decline in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 3.3% over the next 12 months. While this projection indicates its newer products and services will catalyze better top-line performance, it is still below average for the sector.
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Operating Margin
Korn Ferry has done a decent job managing its cost base over the last five years. The company has produced an average operating margin of 11.3%, higher than the broader business services sector.
Looking at the trend in its profitability, Korn Ferry’s operating margin rose by 6.5 percentage points over the last five years, as its sales growth gave it immense operating leverage.
This quarter, Korn Ferry generated an operating profit margin of 11.6%, up 4.2 percentage points year on year. This increase was a welcome development and shows it was recently more efficient because its expenses grew slower than its revenue.
Earnings Per Share
Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.
Korn Ferry’s EPS grew at a decent 8.6% compounded annual growth rate over the last five years, higher than its 6.2% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
Diving into Korn Ferry’s quality of earnings can give us a better understanding of its performance. As we mentioned earlier, Korn Ferry’s operating margin expanded by 6.5 percentage points over the last five years. On top of that, its share count shrank by 3.5%. These are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth. 
In Q4, Korn Ferry reported EPS at $1.19, up from $1.09 in the same quarter last year. This print beat analysts’ estimates by 5.4%. Over the next 12 months, Wall Street expects Korn Ferry’s full-year EPS of $4.89 to grow 4.6%.
Key Takeaways from Korn Ferry’s Q4 Results
We enjoyed seeing Korn Ferry beat analysts’ revenue expectations this quarter. We were also happy its EPS guidance for next quarter outperformed Wall Street’s estimates. On the other hand, its revenue guidance for next quarter missed. Overall, this quarter had some key positives. The stock traded up 1.5% to $63.30 immediately following the results.
Big picture, is Korn Ferry a buy here and now? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.