Why TriNet Group Inc's Stock Dropped as Much as 21% Today

By Markets Fool.com

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

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What: Shares of human resources company TriNet Group Inc dropped as much as 21% today after reporting strong earnings for the first quarter but weak guidance for the year.

So what: Total first-quarter revenue jumped 23% to $625.6 million and net income improved from $1.5 million a year ago to $15.8 million, or $0.22 per share. On an adjusted basis, earnings per share were $0.35 per share, $0.02 ahead of estimates.

Earnings beat estimates across the board, but on the conference call management was concerned about higher workers' compensation costs and revenue growth. They lowered revenue guidance for the year to $580 million-$590 million and earnings guidance to $1.27-$1.35 per share. Analysts had estimated $595 million in revenue and $1.37 per share in earnings.

Now what: It's unusual to see a company beat first-quarter estimates soundly and then lower guidance, but that's exactly what TriNet Group did. An actuarial report done in April resulted in $10 million in higher estimated costs for insurancefor the year than management was previously expecting. That's what caused the guidance miss, and when combined with the lofty expectations that come with a stock trading at 21 times the high end of this year's estimates, it's not surprising to see a sell-off in shares today.

The article Why TriNet Group Inc's Stock Dropped as Much as 21% Today originally appeared on Fool.com.

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Travis Hoium owns shares of Apple. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.