Resources Global Professionals Reports a 6% Earnings Beat

On Thursday evening Resources Global Professionals RECN reported 1QF11 revenues of $124mn, a 6% beat compared to J.P. Morgan's estimate. The strong post was driven by better than expected top-line growth and cost efficiencies. Importantly, RECN core revenues have begun to inflect to YoY growth. Gross margins were better than the prior management expectation. Lower healthcare costs were the primary driver for the reduced sequential decline in gross margins. The payroll tax holiday on new employees that qualify under the HIRE Act also helped. J.P. Morgan is lowering the price target to $17 based on 1.1x EV/s. It has a neutral rating on RECN. RECN is trading 10% higher on the news at $15.10