Computer Task Group's third-quarter profits more than doubled as the Buffalo information technology company's sales grew by 11 percent and the firm worked on more lucrative projects.
The company's earnings were at the high end of CTG's guidance, even though its revenues came in at the lower end of its forecast because the strengthening U.S. dollar.
CTG earned $2.1 million, or 13 cents per share, compared with $914,000, or 6 cents per share, a year earlier. Revenues grew to $89.1 million from $80.6 million.
James R. Boldt, CTG's chairman and chief executive officer, said the company's profitability improved because it added more high-margin work, while the additional revenues also helped spread the company's costs over a broader base.
Healthcare revenues, which account for about a quarter of CTG's sales, grew by 9 percent, and the profitability of that work has improved as the company introduced new solutions products, including some for electronic medical records and to help clients detect fraud, waste and abuse.
But CTG said it expects a downturn in the fourth quarter, largely because one of its major clients, identified by analysts as International Business Machines, has told the company it is cutting its staffing needs by 250 CTG employees, which will reduce its sales by $21 million on an annualized basis.
That cutback will reduce IBM's business with CTG, which totaled nearly $29 million during the third quarter, or 32 percent of CTG's $89 million in total sales, to about 28 percent of sales during the fourth quarter, Boldt said.
"Customers often choose us for our ability to quickly increase or decrease our staff," Boldt said.
As a result, CTG lowered its revenue guidance for the current quarter to $86 million to $88 million, with profits ranging between 9 cents to 11 cents per share. Analysts at brokerage firm Boenning & Scattergood downgraded CTG's stock to "market perform" from their old "market outperform" rating.
For the full year, CTG reduced its revenue forecast to $356 million to $358 million, down from its previous guidance of $363 million to $367 million. Its forecast for earnings was narrowed to 45 cents per share to 47 cents per share, compared with its previous guidance of 44 cents to 48 cents per share.
CTG shares fell 41 cents Wednesday, or 6 percent, to $6.31.