), the global leader in the employment services industry, hinted
that the current sluggish macroeconomic environment resulted in
soft demand for recruitment services, particularly in Europe, and
weighed upon its second-quarter 2012 results. Strong dollar also
acted as a deterrent.
To counter this, the company is now contemplating on exiting its
lower margin business and venturing into high margin business. The
company is also focusing on controlling expense. The
re-organization initiative undertaken by management will results in
annual savings of $20 million.
On the other hand, the ManpowerGroup Solutions business
sustained its growth momentum. The demand for the counter-cyclical
outplacement services portrayed signs of steadiness.
Let's Unveil the Picture
The quarterly earnings of 76 cents a share dropped 12.6% from 87
cents earned in the prior-year quarter but surpassed the Zacks
Consensus Estimate of 72 cents. Unfavorable foreign currencies
fluctuation undermined the earnings by 7 cents. Net earnings per
share came at the high-end of management's guidance of 68 cents to
On a reported basis, including one-time items, earnings came in
at 51 cents, down 41.4%.
Milwaukee, Wisconsin based Manpower said that the quarter's
total revenue of $5,206.7 million fell 8.1% from the prior-year
quarter and 0.8% in constant currency. The revenue also fell short
of the Zacks Consensus Estimate of $5,224 million. The company had
earlier projected total revenue of flat or down 2% in constant
We observe that although cost of services decreased 7.7% to
$4,345 million, gross profit fell 10.4% to $861.7 million due to a
decline in the top line. Gross profit margin shriveled 50 basis
points to 16.5% due to a fall in permanent recruitment revenue and
a soft temporary recruitment gross margin in a few European
Manpower posted operating profit of $94.4 million, down 37.3%
from the prior-year period, whereas operating margin expanded 90
basis points to 1.8%.
By geographic segments, revenue from services in the
edged down 3.6% to $763.2 million from the prior-year quarter.
Segment operating profit plunged 71.6% to $7.7 million.
, revenue rose 2.6% to $389.2 million and 12% in constant currency,
whereas segment operating profit fell 15% to $10.5 million and 8.3%
in constant currency.
, revenue fell 13.2% to $1,427.6 million and 2.5% in constant
currency, whereas segment operating profit plummeted 37.4% to $15.5
million and 29.3% in constant currency.
, revenue fell 20.6% to $274 million and 10.8% in constant
currency, whereas segment operating profit tumbled 43.6% to $12.6
million and 36.6% in constant currency.
Other Southern Europe
, revenue dipped 1.9% to $190.1 million but increased 9.8% in
constant currency, whereas operating profit came in at $3 million,
up 12.8% from the prior-year quarter, and 26.3% in constant
, revenue slipped 9.6% to $1,415.8 million and 1.2% in constant
currency, whereas operating profit plunged 30.2% to $39.2 million
and 23.9% in constant currency.
(Asia-Pacific Middle East), revenue came in at $662.9 almost flat
with the prior-year quarter and rose 1.8% in constant currency.
Segment operating profit jumped 16% to $21.8 million and 17.6% in
dropped 0.9% year over year to $83.9 million but jumped 2.9% in
constant currency. The company posted operating loss of $2.9
million compared with operating profit of $2.8 million in the
Manpower ended the quarter with cash and cash equivalents of
$454.6 million and total debt of $755.1 million, reflecting a
debt-to-capitalization ratio of 23%, and shareholders' equity of
$2,510.9 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 $33 million. The company repurchased 879,000
shares for $32.6 million.
Strolling through Guidance
Manpower now expects third-quarter 2012 earnings in the range of
64 cents to 72 cents a share, including an unfavorable impact of
foreign currency translation of 8 cents. The current Zacks
Consensus Estimate for the quarter is 81 cents.
Management now projects third quarter total revenue growth to be
down in the range of 3% to 5% in constant currency from the
prior-year quarter. Including currency exchange rates, it is
expected to be down 11% to 13%.
On a segment basis, management anticipates revenues to contract
sequentially in constant currency in the Americas, Southern Europe
and Northern Europe. However, it forecasts a low single-digit
growth in Asia-Pacific Middle East and Right Management.
Management projects gross profit margin between 16.3% and 16.5%.
Operating profit margin is projected in the range of 2.1% to 2.3%
compared with 2.7% in the prior-year quarter.
With a well-established network of nearly 3,600 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
Currently, we have a long-term 'Outperform' recommendation on
ManpowerGroup. However, the company, which competes with
Kelly Services Inc.
Robert Half International Inc.
), holds a Zacks #4 Rank that translates into a short-term 'Sell'
rating, and well defines the company's second quarter results as
well as soft third quarter outlook.
KELLY SVCS A (KELYA): Free Stock Analysis
MANPOWER INC WI (MAN): Free Stock Analysis
ROBT HALF INTL (RHI): Free Stock Analysis
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