Engineering a change? Well, no

Philadelphia's CDI Corp. is a great barometer for the economy and, no surprise to anyone, it (meaning the economy) is still in the tank. CDI Corp. is a staffing company that specializes in dispatching engineers in three major segments, process and industrial, government services, and aerospace. It also has a recruiting and temporary staffing division known as Management Recruiters International, an IT staffing arm and a foreign organization, AndersElite, which specializes in construction hiring in England. (By the way, it's really bad there, if AndersElite revenues are any guide -- down from $60.2 million to $25.5 million)

It's the engineering division that I like to watch. Here's why. Engineers come in on the forefront of big capital heavy projects. When companies are confident enough to launch big projects or big revamps, they'll hire engineers in the very early phases. Hiring engineers means that money's moving into the economy. But that's not happening, based on CDI's stats included in its second quarter filing to the SEC.

In June 2008, CDI had six-month revenues in its engineering division of $309.3 million. This June's six month stats? $247 million. For the three months ending on June 30, 2009, engineering revenues were at $118.5 million, down from $153.1 the prior year. Not good.

Government and aerospace work was still moving ahead slightly, but CDI's biggest engineering clients, those in process and industrial companies, cut back assignments drastically. For the three months ended on June 30, revenues in that vertical line of business were down to $81.1 million, from $118.6 million the prior year. Revenues were also down from the previous quarter, showing a downward trend.

It's been a disaster at the bottom line for CDI, even though it has managed to keep its profit margins fairly steady. For the three months ending on June 30 in 2008, CDI came close to a profit of nearly $7 million, or 34 cents a diluted share. This year, it is a paltry $59,000, which comes to bupkis per share. It is so pathetic that in the press release, CDI rounds net earnings up to $0.1 million, which is legitimate, if not completely informative. 

In an SEC filing, CEO Roger Ballou bravely sounded an optimistic note, saying that project bid activity and staffing service revenues in engineering had increased each month in the quarter, although, obviously not enough to reverse the dismal showing. However, if he's right, that may be a slight sign of an improving economy.

Certainly, if this stimulus-infrastructure money is a reality, there should be some reflection of it as it trickles into engineering projects for factories. Perhaps the slight increase in CDI's engineering revenues from government services can be attributable to that growth.