), the global leader in the employment services industry, posted
stronger-than-anticipated fourth-quarter 2012 results on the back
of effective cost management and better gross margin that meet
the upper-end of the company's guidance range. However, earnings
per share dropped year over year as the current sluggish
macroeconomic environment resulted in soft demand for recruitment
services, particularly in Europe, and weighed upon its
The quarterly earnings of 91 cents a share surpassed the Zacks
Consensus Estimate of 77 cents but dropped 7.1% from 98 cents
earned in the prior-year quarter. Unfavorable foreign currencies
fluctuation hurt the earnings by a penny. Net earnings per share
also came ahead of management's previously provided projection of
72 cents to 80 cents a share.
The results fared significantly better than one of its
Robert Half International Inc.
), which recently reported fourth-quarter 2012 earnings of 42
cents a share. Also, this came a penny ahead of the Zacks
Consensus Estimate, and soared 40% from the prior-year quarter
earnings of 30 cents.
Manpower is now contemplating on exiting lower margin business
and venturing into high margin business. The company is also
focusing on controlling expense. On the other hand, the
ManpowerGroup Solutions business sustained its growth momentum.
The demand for the counter-cyclical outplacement services
portrayed signs of steadiness, which increased 16% during the
quarter. Canada, U.K., China and India, all contributed to the
company's growth story. Manpower hinted at a mild recovery in the
markets in 2013.
Let's Unveil Further
When comparing sequentially, the rate of decline in total
revenue of Milwaukee, Wis. based Manpower has decelerated. After
falling 10.5% year over year in the third quarter of 2012, total
revenue dropped 5.1% to $5,202.6 million during the fourth
quarter. In constant currency as well, rate of decline dropped to
3.5% in the quarter under review from 3.8% in the previous
quarter. The soft top-line performance weighed upon the bottom
line. However, total revenue that came ahead of the Zacks
Consensus Estimate of $5,140 million, instilled confidence.
We observe that although cost of services decreased 4.9% to
$4,325.9 million, gross profit fell 6.3% to $876.7 million due to
a decline in the top line. On other hand, gross profit margin
contracted 20 basis points year over year but improved 30 basis
points sequentially to 16.9% that dovetailed with the high-end of
management's expectation of 16.7% to 16.9%.
Manpower posted operating profit of $104.9 million, down 19.1%
from the prior-year period, whereas operating margin contracted
40 basis points to 2%.
By geographic segments, revenues from services in the
fell 2% to $750.7 million from the prior-year quarter. Segment
operating profit plunged 16.9% to $21.7 million.
, revenues rose 4% to $405.4 million and 4.1% in constant
currency, whereas segment operating profit climbed 13.9% to $13.9
million and 11.1% in constant currency.
, revenues fell 13% to $1,314.2 million and 9.5% in constant
currency, whereas segment operating profit plummeted 12% to $18
million and 7.7% in constant currency.
, revenues fell 12% to $268.5 million and 8.5% in constant
currency, whereas segment operating profit tumbled 54.9% to $8.9
million and 52% in constant currency.
Other Southern Europe
, revenues edged down 1.2% to $194 million but increased 2.2% in
constant currency, whereas operating profit came in at $1.4
million, down 50.1% from the prior-year quarter, and 49.1% in
, revenues slipped 3.5% to $1,487.2 million and 2.8% in constant
currency, whereas operating profit plunged 33.9% to $34.2 million
and 33.6% in constant currency.
(Asia-Pacific Middle East), revenues came in at $697.7, up 0.4%
from the prior-year quarter and 1.4% in constant currency.
Segment operating profit rose 31.2% to $28.5 million and 33% in
grew 6.3% year over year to $84.9 million, and 6.5% in constant
currency. The company posted operating income of $8.2 million
compared with operating loss of $5.6 million in the year-ago
Manpower ended 2012 with cash and cash equivalents of $648.1
million, total debt of $770.1 million, reflecting a
debt-to-capitalization ratio of 24%, and shareholders' equity of
$2,500.8 million. The company has no borrowings under its $800
million revolving credit facility. Capital expenditures during
2012 were $72 million.
During the year, the company generated free cash flow of
approximately $260 million. It bought back 2 million and 3.6
million shares worth $77 million and $138 million during the
quarter and in 2012, respectively. The company still had 8
million shares at its disposal at the end of the year under its
share buyback program.
Strolling through Guidance
Manpower now expects first-quarter 2013 earnings in the range
of 40 cents to 48 cents a share. The current Zacks Consensus
Estimate for the quarter is 41 cents.
First quarter is seasonally tough for Manpower. Consequently,
management anticipates first quarter total revenue to decline
between 6% and 8% in the U.S. dollars, and at an equivalent rate
in constant currency from the prior-year quarter. Management
projects revenues in the Americas and APME to remain even or to
improve marginally on an average daily basis, and expects to
register low-single-digit growth at Right Management. Markets
across Europe are expected to remain challenging. However,
positive momentum is expected to sustain in the U.K. and
For the quarter, management projects gross profit margin
between 16.6% and 16.8%, which reflects a slight year-over-year
imporvement but marginally down sequentially. Manpower forecasts
operating profit margin in the range of 1.4% to 1.6% compared
with 1.8% in the prior-year period.
With a well-established network of approximately 3,500 offices
in about 80 countries, Manpower currently offers its services to
about 400,000 clients. We believe 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, the stock holds a Zacks Rank
Other stocks in the business services sector that you could
), holding Zacks Rank #1 (Strong Buy) and
) carrying Zacks Rank #2 (Buy). Both are expected to continue
with their upbeat performances and sustain their positive
earnings surprise trend.
ON ASSIGNMENT (ASGN): Free Stock Analysis
KORN/FERRY INTL (KFY): Free Stock Analysis
MANPOWER INC WI (MAN): Free Stock Analysis
ROBT HALF INTL (RHI): Free Stock Analysis
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