HR Vendors Predict Good 2011; Wall Street Bids Up Two

Feb 10, 2011
This article is part of a series called Financial.

With their stock price zooming today, HR software vendors Taleo and SuccessFactors have got to be enjoying Wall Street’s reaction to their 2010 financial results.

Taleo reported a small profit. SuccessFactors reported a pretty sizable loss. But both companies did better in most areas than financial analysts had expected and both predicted strong first quarters and full-year performance.

SuccessFactors estimated its current quarter would see revenue in the range of $62.5 million to $63.5 million and $265 million-$270 million for the full year. Taleo, which beat Wall Street’s 4th quarter revenue estimate of $67.3 million by just over 5 percent, also expects a strong 2011.

The company’s stock closed today at $35.01, up 16.3 percent on the day.

Kenexa, which saw its share price climb Wednesday, was down about 1 percent today, closing at $24.33. The company beat its own income prediction, coming in at $7.4 million, or half a million above its top-end estimate. It also beat its earnings per share guidance by 1 cent.

Kenexa’s 2011 estimate is for revenue in the $240 million to $248 million and per share earnings of 62 cents to 82 cents. The guidance is in the range of Wall Street’s estimates.

Analysts at Oppenheimber and Webush have raised their price targets for Kenexa this week, a show of support for the company’s continued improvement. Oppenheimer rated Kenexa “outperform.”

(One side note: “We: How to Increase Performance and Profits Through Full Engagement,” a book written by Kenexa CEO Rudy Karsan, hit the bestseller lists of both The New York Times and USA Today.)

Taleo, which closed Thursday at $33.89 (up 10.5 percent ) may have benefited from an Oppenheimer report, which maintained its”outperform” rating, while raising its price target for Taleo, going from $33 a share to $37.

Another financial firm, J.P. Morgan, though it did not offer any price guidance, noted in a report to investors that Taleo beat the consensus estimates and Morgan’s own.

Barron’s, in a detailed article on SuccessFactors’ financials, said its 4th quarter “exceeded expectations across most metrics due to exceptionally strong billings growth aided by its recently completed acquisitions, particularly Inform.”

The financial results and the company’s 2011 estimates prompted Barron’s to raise its earnings and revenues estimates. The financial publication says it expects SucccessFactors revenue to be $265.5 million for 2011 and to earn 10 cents a share.

As the numbers were being reported Wednesday, HR technology consultant Naomi Bloom tweeted an obvious question: “Has anyone noticed that Kenexa and SuccessFactors are posting losses? What don’t I understand here? Is there a new way to make money?”

A few minutes later, when Taleo’s report came out, she added this: “Taleo just in, and they lost a little money too. Does everyone expect to make it up in volume? I can’t wait for learned analysis on this.”

Jason Corsello, a vice president at Knowledge Infusion, offered his own take, echoing Bloom’s: “Growth, growth, growth, which I totally get, but my question is WHEN will they make money? How much? For how long? Your guesses?”

NOTE: Numbers in the chart accompanying this post are from the GAAP financials. Wall Street analysts typically look at adjusted financials (non-GAAP) and base estimates on those numbers. Most financial releases include operating financial reports that comply with GAPP and a reconciliation that doesn’t include certain financial expenses, such as one-time acquisition expenses, that distort the actual operating picture.

This article is part of a series called Financial.
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