HLI Plummets 5.6% on Earnings Optimism and Restructuring Woes: A Tale of Two Segments

Summary
• Houlihan Lokey (HLI) slumps 5.59% intraday to $188.15, erasing $11M in market cap
• Q3 earnings beat estimates with 26% EPS growth, but restructuring fees drop 9%
• Bollinger Bands show price near 185.83 support, 200D MA at 181.03
HLI’s sharp intraday decline reflects divergent market reactions to its earnings report: while operating leverage boosted profits, weak restructuring performance and cost pressures triggered a sell-off. The stock’s 5.6% drop—its largest single-day decline since March—underscores investor skepticism about the firm’s ability to sustain momentum in its core counter-cyclical segment.

Earnings Optimism Clashes with Restructuring Weakness
HLI’s 5.6% intraday plunge stems from a stark disconnect between its earnings report and market expectations. While the firm’s 26% adjusted EPS growth—driven by 14.7% revenue growth and 1.6pp expense ratio improvement—exceeded estimates, the 9% decline in average restructuring fees per deal exposed vulnerabilities. The Financial Restructuring segment’s 2% revenue growth despite 12% more transactions signaled pricing pressure, undermining HLI’s traditional cyclical hedge. Meanwhile, GAAP compensation costs surged 17.4% due to acquisition-related expenses, amplifying concerns about margin sustainability.

Capital Markets Sector Mixed as HLI Underperforms
The broader Capital Markets sector showed mixed momentum, with Goldman Sachs (GS) down 0.22% as investors priced in Fed policy uncertainty. HLI’s 5.6% decline outpaced sector volatility, reflecting its unique exposure to restructuring fee compression. While M&A activity in the Corporate Finance segment drove 21% revenue growth, the sector’s focus on capital markets execution left HLI’s counter-cyclical strength in limbo.

Options Playbook: Hedging Volatility with 11/21 Expirations
• 200D MA: 181.03 (below) • RSI: 69.22 (overbought) • MACD: 0.187 (bullish) • Bollinger Bands: 185.83 (lower) to 203.76 (upper)
HLI’s technicals suggest a short-term bounce from 185.83 support but long-term bearish bias below 200D MA. The 5.6% intraday drop has created asymmetric options opportunities. Two contracts stand out: HLI20251121P185 and HLI20251121C210.
• HLI20251121P185 (Put): Strike $185, IV 33.41%, Delta -0.385, Theta -0.0288, Gamma 0.0247, Turnover 0
- IV at mid-range, Delta suggests moderate downside sensitivity, Gamma indicates accelerating decay as price approaches strike
- This put offers 43.14% leverage for a 5% downside scenario, with max payoff of $13.15 (K=185, ST=178.54)
• HLI20251121C210 (Call): Strike $210, IV 31.53%, Delta 0.091, Theta -0.0763, Gamma 0.0112, Turnover 480
- High leverage (314.19%) but low Delta for a bullish breakout play
- 5% upside scenario yields $11.54 payoff (K=210, ST=197.55), but theta decay (-0.0763) favors rapid price movement
Aggressive bulls may consider HLI20251121C210 into a bounce above $200, while HLI20251121P185 offers downside protection if support breaks.

Backtest Houlihan Lokey Stock Performance
Key findings1. 517 occurrences of an intraday draw-down ≥ -6 % were identified for Houlihan Lokey (HLI.N) from 1 Jan 2022 to 30 Oct 2025.2. The post-event drift is statistically weak: • Average cumulative return after 30 trading days ≈ +2.45 % • S&P-500 benchmark (proxy) over the same windows ≈ +2.44 % • No day-by-day excess return reached conventional significance levels.3. Win-rate (price higher than the event-day close) edges up from 53 % on day 1 to 64 % by day 30, but the improvements are not statistically compelling.Interpretation• The market tends to mean-revert mildly after sudden intraday plunges, but the edge is too small to overcome trading frictions. • Because the historical OHLC file does not contain true intraday low data, the -6 % plunge signal was approximated with the lowest reported daily span; results would need minute bars to be fully robust.Next steps• If you are interested in a tradable strategy, consider combining the -6 % plunge with volume or volatility filters, or tighten exits with stop-loss / take-profit rules. • Feel free to ask for additional conditioning (e.g., only plunges that happen on earnings days).Below is an interactive event back-test panel; click to explore the curves and distribution in detail.

HLI at Crossroads: Watch 185.83 Support and GS Sector Lead
HLI’s 5.6% decline highlights the tension between earnings-driven optimism and restructuring fee compression. While the 26% EPS outperformance validates operating leverage, the 9% drop in restructuring fees signals a weaker cyclical hedge. Investors should monitor the 185.83 support level and 200D MA (181.03) for directional clues. The sector leader, Goldman Sachs (GS), down 0.22%, offers a barometer for capital markets sentiment. A break below 185.83 could trigger a test of 179.45 (200D support), while a rebound above 200D MA would validate short-term bullish momentum. Position sizing should reflect the high volatility (37.26% IV) and divergent segment performance.