ResCare shares climb on better-than-expected 1Q profit

LOUISVILLE, Ky.—ResCare Inc., which provides residential, training and support services to people with physical and mental disabilities, said Thursday its first-quarter earnings grew 18 percent to top Wall Street expectations, and backed its outlook for fiscal 2008.

Net income after paying preferred dividends rose to $10.3 million, or 36 cents per share, from $8.7 million, or 31 cents per share, a year ago.

Revenue for the three months ended March 31 increased 11 percent to $375.4 million from $338.5 million.

Analysts surveyed by Thomson Financial expected profit of 35 cents per share on revenue of $376.6 million.

Shares rose $1.50, or 9 percent, to $18.34 in afternoon trading.

Looking ahead, the company affirmed its outlook for 2008 earnings per share of $1.44 to $1.50 on revenue of $1.55 billion to $1.62 billion. Wall Street has predicted profit of $1.48 per share on revenue of $1.56 billion.

In a note to clients, RBC Capital analyst Kevin Ellich said the "solid" quarterly results could help boost management's credibility and help build investor confidence in the company's ability to hit its guidance. He noted that lower interest and operating expenses helped offset below-plan community services revenue.

AvondalePartners analyst Kevin Campbell maintained his "Market Outperform" rating on ResCare, saying shares continue to trade at an attractive valuation.