ManpowerGroup
(
MAN
), the global leader in the employment services industry, recently
posted first-quarter 2012 results that topped the Zacks'
expectations. The company's strong performance came on the back of
revenue growth with Asia-Pacific Middle East segment portraying
robust performance. Better expense control also provided cushion to
the bottom-line.
Manpower also witnessed a surge in permanent recruitment
business, and its workforce solutions business sustained its growth
momentum. The demand for the counter-cyclical outplacement services
portrayed signs of steadiness.
However, Manpower hinted that given the current macro-economic
environment it expects sluggish demand for its services,
particularly in Europe, during the second quarter of 2012. To
counter this, the company is now contemplating on exiting lower
margin business and venturing into high margin business.
Let's Unveil the Picture
The quarterly earnings of 50 cents a share beat the Zacks
Consensus Estimate of 35 cents and increased 16.3% from 43 cents
earned in the prior-year quarter. Net earnings for the quarter also
exceeded management's forecast of 30 cents to 38 cents a share.
Milwaukee, Wisconsin based company, Manpower, said that total
revenue for the quarter rose 0.5% to $5,096.4 million from the
prior-year quarter and 3% in constant currency, and also came ahead
of the Zacks Consensus Estimate of $4,984 million. The results were
far better than what management had expected. The company had
earlier projected total revenue to be flat or marginally up in
constant currency.
We observe that cost of services climbed 0.8% to $4,249 million,
whereas gross profit fell 1.2% to $847.4 million. Gross profit
margin shriveled 30 basis points to 16.6%.
Manpower posted operating profit of $93.8 million, up 9.5% from
the prior-year period, whereas operating margin expanded 10 basis
points to 1.8%.
Segment Details
By geographic segments, revenue from services in the
United States
edged down 2% to $735.8 million from the prior-year quarter.
However, segment operating profit plunged 20.8% to $6.9
million.
In
Other Americas
, revenuerose 11.3% to $402.5 million and 16.1% in constant
currency, whereas segment operating profit jumped 19.7% to $15.3
million and 26.2% in constant currency.
In
France
, revenue fell 4.6% to $1,291.8 million and 0.4% in constant
currency, whereas segment operating profit plummeted 54.3% to $5.5
million and 51.4% in constant currency.
In
Italy
, revenue fell 6% to $267.5 million and 1.9% in constant currency,
whereas segment operating profit grew 12.7% to $14.5 million and
18% in constant currency.
In
Other Southern Europe
, revenue grew 8.5% to $195.2 million and 13.7% in constant
currency, whereas operating profit came in at $3.5 million, up 56%
from the prior-year quarter, and 64.9% in constant currency.
In
Northern Europe
, revenue slipped 0.9% to $1,444 million but jumped 2.6% in
constant currency, whereas operating profit grew 4.8% to $43.9
million and 8.3% in constant currency.
In
APME
(Asia-Pacific Middle East), revenue rose 12.8% to $680 million and
9.8% in constant currency. Segment operating profit jumped 18.5% to
$19.6 million and 16.1% in constant currency.
Revenue from
Right Management
dropped 2.6% (or 2% in constant currency) to $79.6 million,
reflecting substantial improvement from a decline of 8.2%
experienced in the fourth quarter of 2011, as counter-cyclical
outplacement business stabilizes rising 3% during the quarter,
offset by a 13% fall witness across talent management revenue.
Right Management posted an operating profit of $2.5 million, down
24.6% from the year-ago quarter, and 24.5% in constant
currency.
Financial Aspects
Manpower ended the quarter with cash and cash equivalents of
$553.5 million, total debt of $721.8 million, reflecting a
debt-to-capitalization ratio of 22%, and shareholders' equity of
$2,568.5 million. The company has no borrowings under its $800
million revolving credit facility.
During the quarter, the company generated a negative free cash
flow of approximately $40 million. Capital expenditures for the
quarter were $19.7 million.
Strolling through Guidance
Manpower now expects second-quarter 2012 earnings in the range
of 68 cents to 76 cents a share, including an unfavorable impact of
foreign currency translation of 4 cents. The current Zacks
Consensus Estimate for the quarter is 76 cents.
Management now projects second quarter total revenue to be flat
or down 2% in constant currency, when compared with the prior-year
quarter. On a segment basis, management forecasts low to mid-single
digit growth in constant currency for the Americas, Asia Pacific
and Right Management. Revenue for Southern Europe and Northern
Europe is expected to fall in the low to mid-single digits in
constant currency.
Management projects sequential improvement in the gross profit
margin, and is expected to be somewhat in line with the prior year.
Operating profit margin is projected to be in the range of 2.3% to
2.5%.
Closing Commentary
With a well-established network of nearly 3,800 offices in
approximately 80 countries, Manpower currently offers its services
to about 400,000 clients. We believe that Manpower's brand value,
comprehensive range of services and a strong global network provide
a competitive advantage and reinforce its dominant position in the
market.
Currently, we have a long-term 'Neutral' recommendation on
ManpowerGroup. Moreover, the company, which competes with
Kelly Services Inc.
(
KELYA
) and
Robert Half International Inc.
(
RHI
), holds a Zacks #3 Rank that translates into a short-term 'Hold'
rating.
KELLY SVCS A (
KELYA
): Free Stock Analysis Report
MANPOWER INC WI (
MAN
): Free Stock Analysis Report
ROBT HALF INTL (
RHI
): Free Stock Analysis Report
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