Cra International: Not Enough Visibility to Gauge Position

Cra International Inc. (CRAI) got clobbered this week as it lowered guidance across all fronts. FY2007 sales growth was lowered from 15/18% to 10/12%. Earnings per share estimates were lowered from 18/23% to 12/17%.

What is troubling analysts is that the company doesn't really have a clue as to what will happen next quarter. Only two months ago the company confirmed the FY2007 outlook. Now it appears that litigation related sales are impacting performance across the board. CRAI did not mention if it was pursuing (or not) other avenues, nor would the company estimate the impact should the litigation related sales suddenly move forward as previously anticipated.

This is a real wild card that allows the stock to suddenly bounce back if it has a fantastic third quarter or if the market anticipates improvement. There simply is not enough visibility to gauge this one. We no longer consider CRAI as a possible short play and advise closing out the short position.

CRAI 1-yr chart

Disclosure: No current conflicts.