HireQuest: A Strong Buy Amid Revenue Growth and Cost Management Success

HireQuest (HQI – Research Report), the Industrials sector company, was revisited by a Wall Street analyst today. Analyst Kevin Steinke from Barrington maintained a Buy rating on the stock and has a $19.00 price target.

Kevin Steinke’s rating is based on a confluence of positive developments within HireQuest, despite some challenges in the broader economic environment. Steinke acknowledges that the company’s fourth-quarter results surpassed expectations, with franchise royalty fees—a primary revenue source—growing significantly year-over-year. This growth is primarily attributed to the acquisition of MRINetwork, which bolstered overall sales even as organic growth experienced a modest decline. Furthermore, the introduction of advertising fund revenue from MRI, which did not exist in the previous year’s quarter, contributed to total revenue growth. Although this new revenue stream does not affect profitability due to equivalent advertising expenses, it represents a diversification of income sources.

In addition to revenue growth, Steinke is optimistic about HireQuest’s ability to manage expenses and improve profitability. Adjusted EBITDA for the quarter, although slightly down year-over-year, exceeded estimates, indicating better-than-expected operational performance. Steinke also highlights the company’s efforts in reducing selling, general, and administrative (SG&A) expenses, excluding non-recurring costs like workers’ compensation, impairment of notes receivable, and advertising fund expenses. The adjusted SG&A expenses have not only decreased year-over-year but also sequentially over the past three quarters. This trend underscores the company’s success in achieving cost synergies following the MRINetwork acquisition. Moreover, there is an anticipated reduction in future workers’ compensation expenses due to policy renewals, which could further enhance profitability. These factors collectively support Steinke’s Buy rating for HireQuest’s stock.

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HireQuest (HQI) Company Description:

HireQuest, Inc. engages in providing temporary staffing services. It also provides back office support team for HireQuest Direct and HireQuest franchised branch locations across the U. S. The company was founded in 1998 and is headquartered in Goose Creek, Sc.