Hewitt Balances Investments, Shareholder Confidence

Daily Herald (Arlington Heights, IL), May 28, 2006 | Go to article overview

Hewitt Balances Investments, Shareholder Confidence


Byline: Sierra Millman Medill News Service

Hewitt Associates Inc., the Lincolnshire-based human resources outsourcing and consulting service, is attempting a tricky balancing act as investments designed for long-term gain put pressure on short-term profits and shareholder confidence.

Analysts are divided, as five call the stock a "buy," eight a "hold" and three a "sell."

Some analysts say the company's determined expansion in human resources business process outsourcing, which is still losing money, is only temporarily burdening earnings and will eventually boost them.

"That's just how it works," said Kristan Rowland, equity analyst with Morningstar Inc., a financial research company based in Chicago. "Just like any company. If you were a retailer and you expanded your store base, you'd incur all these costs ... until you had customers coming in to buy things."

Through outsourcing, Hewitt provides and coordinates multiple human resource services, including payroll, benefits, compensation, training and development for big clients such as Colorado-based not-for-profit Catholic Health Initiatives, Philadelphia-based specialty materials business Rohm and Haas Co. and North Carolina- based financial services giant Wachovia Corp.

Analysts estimate that Hewitt's earnings per share will increase slightly in its fiscal year ending Sept. 30 to $1.32, then rise more dramatically in 2007 to $1.52, compared with $1.28 in its last fiscal year.

Shareholders' confidence, in contrast, may be flagging. …

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