We reaffirm our long-term Neutral recommendation on
), the global leader in the employment services industry with a
target price of $54.00, following the company's
better-than-expected fourth-quarter 2012 results, offset by soft
projection. However, the company retains a Zacks Rank #2 (Buy)
status that well defines its long-term positive earnings surprise
Why the Reiteration?
Manpower posted stronger-than-anticipated fourth-quarter 2012
results on the back of effective cost management and stabilized
gross margin. The quarterly earnings of 91 cents a share beat the
Zacks Consensus Estimate of 77 cents. The company's earnings have
consistently beaten the Zacks Consensus Estimate in the last 17
quarters. However, it fell 7.1% from the prior-year quarter as
the current sluggish macroeconomic environment resulted in soft
demand for recruitment services, particularly in Europe, and
weighed upon its results.
Total revenue dropped 5.1% to $5,202.6 million during the
quarter but came ahead of the Zacks Consensus Estimate of $5,140
Manpower is now contemplating on exiting lower margin business
and venturing into high margin business. The company is also
focusing on controlling expenses. 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.
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.
However, we remain concerned about the company's soft top and
bottom lines projection for the first quarter of 2013, and the
macroeconomic conditions, particularly in Europe.
Management anticipates first-quarter 2013 total revenue to
decline between 6% and 8% from the prior-year quarter. Manpower
now expects first-quarter earnings in the range of 40 cents to 48
cents a share, reflecting a year-over-year decline of 20% to 4%,
respectively. The current Zacks Consensus Estimate for the
quarter is 44 cents.
Other Stocks to Consider
Other stocks in the business services sector that you could
), holding a Zacks Rank #1 (Strong Buy), along with
On Assignment Inc.
Robert Half International Inc.
), both of which carry a Zacks Rank #2 (Buy). These stocks 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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