BearingPoint Stock Upgraded, But Long Way To Go Yet

BearingPoint (NYSE: BE) was recently upgraded by Standard and Poors from 2 stars (sell) to 3 stars (hold), the analyst cited that price declines had led to the stock below $8, and the valuation was compelling. The analyst thinks that the company will earn an EPS of 40 cents due to recent successes in securing contracts. The year-out price target is $8.50 for a P/E of 21. Let's step back here. BE earned an EPS of 18 cents in 2005, and 2 cents in Q1-2006, the Street thinks that BE will hit an EPS of 34 cents in 2006, and the mean analyst pegs the target price at $9.84. On April 25th, BE itself lowered its 2006 outlook due to higher-than-expected compliance expenses to $150 million to $200 million in operating income, down from a previous forecast of $180 million to $250 million. The company backed previous guidance for $3.5 billion to $3.7 billion in revenue for 2006. Street was expecting $3.69 billion revenue. The company said its revised forecast includes $80 million to $120 million in costs related to its audit, the filing of its 2005 annual report, increased compliance staff and infrastructure costs, and up to $25 million in non-cash lease facilities restructuring charges. There is still a lot of risk in this company: still paying the bills for ongoing audit, no 2005 10-K filing as yet, 24% employee attrition levels, low consultant utilization rate% and a new management team BE earned 18 cents in 2005, so a 34 cent 2006 result would be nearly 100% improvement in performance. We saw Accenture recently with a blow-out quarter so the fundamental demand for consulting and outsourcing is strong, but will that rising tide carry BearingPoint as well? We invite comment from our readers on the real state of affairs at BE and whether the stock price, performance and underlying business dynamics are all in line. Article provided by www.big4.com