Bad Times Can't Stop Hewitt Human Resource Giant Sees Growth on Horizon; Analysts Rate Highly

By Comerford, Mike | Daily Herald (Arlington Heights, IL), January 16, 2003 | Go to article overview

Bad Times Can't Stop Hewitt Human Resource Giant Sees Growth on Horizon; Analysts Rate Highly


Comerford, Mike, Daily Herald (Arlington Heights, IL)


Byline: Mike Comerford Daily Herald Business Writer

A national healthcare crisis appears to be looming and the economy is struggling to recover from a recession. Nonetheless, Hewitt Chief Executive Officer Dale Gifford said this week he expects his human resource services firm to grow rapidly.

"We continue to believe that for the next two, three, four years, we will continue to grow at double-digit growth levels," Clifford said.

Lincolnshire-based Hewitt Associates' stock price is up nearly 60 percent since its IPO in June. It finished the year with sales up 18 percent. And it is hiring, contrary to many other area corporations.

As Hewitt prepares for its first annual shareholders meeting on Jan. 22, Gifford, a native of Ladysmith, Wis., is preparing for the best. SmartMoney magazine ranks Hewitt one of its top 10 stock picks.

"I think they could be a good growth stock for a long time," said David Farina, analyst for William Blair & Co., a financial services firm in Chicago. He has Hewitt listed as an "outperform" stock.

At Morgan Stanley in New York, analyst Chris Gulek said the stock is fairly priced where it has been lately, at $30.15, or 25 times earnings, but he sees potential.

"We see them growing earnings per share at a rate of about 20 percent a year and their stock could expand at the same rate," Gulek said. "That's not bad in this market."

As for what he's going to tell investors and analysts at that annual meeting, international growth may become a key long-term expansion topic. Shortly before the IPO, Hewitt bought U.K.-based human resources firm Bacon & Woodrow. Lately, Gifford has been traveling a lot to China and India.

"Ten years from now, (China and India) will be a dramatically bigger part of what Hewitt does because they'll be a growing part of what our clients are doing," he said.

However, he's quick to say short-term growth will be in developed areas such as North America and Europe. The bulk of that growth will be internal rather than through acquisitions, he said.

Hewitt's revenues come from two sides, human resource consulting and outsourcing.

The consulting portion gives advice on staffing, recruitment, training, healthcare and retirement. It's a $23 billion industry, according to industry estimates.

The outsourcing part, takes over a mid-sized to large company's human resources. Outsourcing accounts for about 60 percent of revenues, according to Gulek.

Among large companies that outsource, Hewitt counts about half as clients, Gifford said, adding that it is growing in market share as well. …

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