) reported first-quarter earnings per share of 11 cents, vs. 5 cents a year ago, on sharply higher revenues. Needham downgraded the stock to hold from buy.
Analyst Andrew Jeffrey says the company's first-quarter results were in line, but its second-quarter guidance was sharply lower than his model and Street forecasts. He notes while IFOX continues to enjoy organic revenue growth that's faster than the group average, its pace of expansion slowed in the first quarter as deal closings were pushed out.
Jeffrey also notes significantly higher-than-expected operating expenses as it incurred lingering cost redundancies from the recent Verizon IT acquisition and less high-margin non-contractual revenue in the first quarter. He says he's skeptical of the company's ability to achieve aggressive second-half ramp.
The analyst cut his EPS estimates from 68 cents to 52 cents for 2005, and from 87 cents to 76 cents for 2006.