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UPDATE 2-Korn/Ferry Q1 results beat Street, shares up

(Recasts; adds details from conference call, analyst comment, share movement)

BANGALORE, Sept 9 (Reuters) - Executive recruiter Korn/Ferry International Inc KFY.N posted better-than-expected quarterly results, helped by solid growth at its core segment and strength in the North American and Europe markets, sending its shares up 13 percent.

But the company is seeing weak new businesses in August in North America and Europe due to seasonality, Chief Financial Officer Steve Giusto said on a conference call with analysts.

He also said Korn/Ferry, which earns about 45 percent of its revenue from North America, expects continued challenges in the financial services market in the short term. Revenue at the segment fell about 8 percent during the first quarter.

For the second quarter, the company forecast earnings of 26 cents to 33 cents a share and fee revenue of $185 million to $200 million. Analysts were looking for 30 cents a share, according to Reuters Estimates.

“This guidance reinforces our view that further weakening of the U.S. hiring environment, especially in financial services, may cause “shoe to drop” in permanent placement sector in coming months,” Credit Suisse analyst Kevin McVeigh said in a note to clients.

McVeigh was also cautious on the impact of U.S. and European slowdown. He rates the stock “neutral.”

Q1 RESULTS BEAT STREET

For the first-quarter ended July 31, net income dropped to $15.9 million from $17.1 million, a year ago. Earnings per share were flat at 36 cents.

Fee revenue and total revenue rose 11 percent to $205.7 million and $217.5 million, respectively, according to a regulatory filing.

Analysts on average were expecting earnings of 30 cents a share, before special items, on revenue of $206.0 million.

Fee revenue at Korn/Ferry’s executive recruiting segment grew 9 percent to $174.6 million. The company also saw a 15 percent rise in the average fee billed per executive search engagement.

North American fee revenue rose 8 percent, while European fee revenue rose 15 percent. Asia-Pacific fee revenue was down 5 percent.

Shares of the Los Angeles-based company touched a high of $19.74, before paring gains to trade up $1.96 at $19.38 Tuesday morning on the New York Stock Exchange. (Reporting by A.Ananthalakshmi in Bangalore; Editing by Amitha Rajan) ((ananthalakshmi.as@thomsonreuters.com; within U.S. +1 646 223 8780; outside U.S. +91 80 4135 5800; Reuters Messaging: ananthalakshmi.as.reuters.com@reuters.net))

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