Resources Connection Shares Fall

The Irvine, Calif., company's profit was a penny per share less than analysts expected, according to a poll by Thomson Financial.

Lehman Brothers analyst Gary Bisbee said the company's decision to give employees an extra week of paid vacation, without finding a way to pay for it, continues to hurt margins.

He lowered his profit estimates for the third-quarter to 24 cents per share from 27 cents per share, and for 2008 to $1.06 per share from $1.14 per share. Bisbee also lowered his price target to $23.50 from $28.50 with an "Equal weight" rating.

Third-quarter guidance of $210 million sales is "disappointing," Bisbee said, noting that he expected about $214 million after funds from a recent acquisition are added.

"We believe that management's cautious outlook is an admission that a slowing economy may have a negative impact on its business in the near-term," Bisbee said in a client note.

Robert W. Baird & Co. analyst Mark Marcon also lowered estimates and his price target but noted that Resource Connection could be a good long-term investment.

He lowered his 2008 earnings guidance to $1.12 per share from $1.20 per share and cut his price target to $24 from $29. His "Neutral" rating remained unchanged.

"We believe that a wide range of outcomes is possible, and if the macroeconomic slowdown proves more mild than we are previously assuming, some upside to our estimates is possible," Marcon said in a client note.

Shares fell $1.50, or 7.7 percent, to $17.91 in Friday morning trading.