Saturday, 3 February 2024

Why Exponent Stock Is Falling Today

by Rose White

Earnings from consulting firm Exponent (NASDAQ: EXPO) came in below expectations, and the company continues to see challenges heading into 2024. Investors are moving to the sidelines, sending shares of Exponent down 15% as of 10:45 Eastern Friday.

The growth engine is sputtering heading into 2024

Exponent is an engineering and tech consulting firm, offering expertise in about 90 technical disciplines to companies around the world. But with so many of those customers looking to trim costs due to concerns about the macro environment, the last three months proved more challenging for Exponent than analysts had hoped.

The company reported fourth-quarter earnings of $0.41 per share on revenue of $122.9 million, compared to Wall Street expectations for $0.44 per share in earnings on sales of $119 million. Revenue was up 7% year over year, led by gains in its engineering and science segment. The smaller environmental and health segment, which represents just 16% of revenue in the fourth quarter, saw sales drop by 3% due to client budget constraints.

Looking ahead, Exponent said it expects revenue to be flat to down by low single digits in the first quarter and for all of 2024.

“Constrained budgets and project delays stemming from ongoing macroeconomic uncertainty are impacting litigation as well as proactive work, and we will continue to face headwinds in the consumer electronics sector,” CEO Catherine Corrigan said in a statement.

Is Exponent a buy after its earnings miss?

The news wasn’t all bad for Exponent shareholders. The company is boosting its quarterly dividend by $0.02 per share to $0.28, its 11th consecutive year increasing the payout. The board also increased Exponent’s stock repurchase authorization by $61.6 million to $100 million.

Exponent is generating plenty of cash. In 2023, the company paid out $54 million in dividends and repurchased $24.2 million worth of common stock and still ended the year with a cash balance of $187.2 million, 15% higher than the end of 2022. Over the past five years, Exponent has now decreased its share count by just over 4%.

The company appears to be doing fine, but with end markets sluggish, this is to be a year of retrenchment and not a year of growth. For income-focused investors with the patience to ride out the macro headwinds, now could be a good time to give Exponent shares a look.

Should you invest $1,000 in Exponent right now?

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Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Exponent. The Motley Fool has a disclosure policy.