Huron Consulting's shares plunged more than 25% on Friday after the company announced plans to cut annual revenue projections due to weakened demand and project delays in its healthcare and legal segments.
The Chicago-based firm lowered its guidance for the second time this year, down more than 7% from projections made in the first quarter to projected annual revenue of between $835 million and $850 million. It also cut projected adjusted earnings per share to a range of $3.60 to $3.70.
Huron's 2014 revenue totaled $811.3 million.
CEO Jim Roth said in a phone call with analysts that the moves reflect "our expectations for reduced revenue from one of our large healthcare clients, the temporary reduction in demand for our healthcare performance improvement solutions and the lack of visibility in our legal business."
"This is not where we wanted to end the quarter, let alone the year," he said, but added the firm was in no danger of losing market share. "I'm excited about our prospects for the coming year."
Huron closed at $46.62, down 24% off Thursday's close. The lowest closing price in the previous 52 weeks was $58.13 on April 29.
A spokeswoman for Huron did not return a message seeking comment.
Huron had anticipated an increase in lucrative assignments in 2015, as requirements in the 2010 Affordable Care Act encouraged hospitals to chase economies of scale by merging. In previous earnings calls this year, Roth discussed three projects estimated to make the firm between $40 million and $80 million apiece, dwarfing jobs Huron has tackled in the past.
Roth said Thursday that one of those jobs will be completed this year. But a second started later in the year than expected, pushing Huron's anticipated payday into 2016 or 2017. A third not only started later than expected, but it's also smaller in scope than Huron expected it to be. The firm did not identify its clients.
William Blair analyst Tim McHugh speculated in a report that the third client "is a Midwestern, Catholic health system with about 90 hospitals that has done a number of mergers in the last few years. We believe that some of the corporate initiatives intended to drive cost savings and integrate the hospitals are being met with some resistance from individual hospitals or small groups of hospitals, and the client is being much more cautious than expected about how it deploys Huron to do the expected work. Management believes the pace of work will pick up at some point, but it is hard to predict."
Obamacare also has boosted revenues for hospitals as they collect payment for treating newly insured patients, Roth said. That has translated into less urgency for Huron's advice on how to cut costs.
In the legal segment, the firm's largest business after healthcare, a slowdown in credit crisis work combined with a few deferred projects to lower expectations for annual revenue by 20%, Roth said.
