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On Assignment falls on Q3 miss, Wells Fargo downgrade

  • On Assignment (ASGN -5.7%) shares are taking a bath after the company reported in-line revenue in Q3 but missed on EPS.
  • Gross margin dipped 70 bp Y/Y to 30.2% but was up 40 bp sequentially. "[C]ompression was primarily due to a higher mix of revenues from Apex, which carries a lower gross margin and a lower mix of permanent placement and conversion fees," noted CEO Peter Dameris.
  • Management expects Q4 revenue of $429M-$433M (consensus of $430.2M) and EPS of $0.31-$0.33 ($0.33).
  • PRresults, conference call (transcript)
  • Meanwhile, Wells Fargo downgraded ASGN to Perform while raising its PT range to $33-$34 (from $32-$33). Analyst Ed Caso cited valuation concerns, but believes "On Assignment is well positioned for above-market growth and gross margin due to its focus on the attractive IT (80% of revenue) and healthcare and life sciences (20% of revenue) markets." ASGN shares had climbed 76% in the last year through yesterday.
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