Need for SOX-Related Services Expected to Slow in 2005

With the demands of Sarbanes-Oxley regulations expected to drop off next year, analysts have downgraded shares of Robert Half International Inc., which provides temporary accounting and finance services.

On news of UBS' downgrade to a "reduce" from a "neutral," Robert Half stocks fell more than 5 percent Monday, Investor's Business Daily reported. UBS reduced its price target to $21 from $30. Robert Half recently traded at $25.53.

Analyst Kelly A. Flynn told the Wall Street Journal that most companies are required to be in compliance with the 2002 Sarbanes-Oxley Act by the end of this year. When the deadline passes, staffing demand fades, Flynn said. UBS lowered its revenue estimate for 2005 to $2.94 billion from $3.14 billion.

"Following our survey of companies' Sarbanes-Oxley spending plans, we have become concerned that Robert Half's growth may disappoint investors in the calendar year 2005 as demand for SarbOx-related services wanes," Kelly wrote in a research note. "While one might tend to think the SarbOx slowdown is priced in, the current valuation makes us think it's not.”

Robert Half offers services to help companies comply with the new corporate reform law, which strengthens audit requirements and changes accounting practices.

"We think that the company's fundamentals should be strong especially through the third quarter," Flynn said. "We don't expect SarbOx demand to fall off until starting the first quarter of 2005."


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