We adopted a Neutral stance on
ManpowerGroup
(
MAN
), a global leader in the employment services industry, with a
price target of $40.00, following better-than-expected
third-quarter 2012 results. Earlier, we had an Underperform
recommendation on the stock.
The company posted stronger-than-anticipated results on the
back of increased gross margin and effective cost management. The
quarterly earnings of 79 cents a share surpassed the Zacks
Consensus Estimate of 68 cents. Net earnings per share also came
ahead of management's previously provided guidance range of 64
cents to 72 cents a share.
Manpower's comprehensive range of services makes the company a
true global staffing firm. The company provides services for the
entire employment and business cycle including permanent,
temporary and contract recruitment, employee assessment and
selection, training, outplacement, outsourcing and consulting.
The company's brand value and strong global network provides it
with a competitive advantage and reinforces its dominant position
in the market.
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. On the other hand, the
ManpowerGroup Solutions business sustained its growth momentum.
The demand for the countercyclical outplacement services is also
portraying signs of steadiness, which rose 18% during the
quarter.
However, what compels us to have a cautious view on the stock
is the company's dwindling top and bottom lines performances as
well as soft projections of the same for the fourth quarter. The
quarterly earnings did came ahead of the estimate but it fell
18.6% year over year as the soft economic environment resulted in
weak demand for recruitment services, particularly in Europe.
Strong dollar also acted as a deterrent.
Moreover, the rate of decline in total revenue of Milwaukee,
Wisconsin based Manpower has accelerated, when comparing
sequentially. After falling 8.1% year over year in the second
quarter of 2012, total revenue dropped 10.5% to $5,172.3 million
during the third quarter. In constant currency too, the rate of
decline increased to 3.8% in the quarter under review from 0.8%
in the previous quarter. The soft top line performance did weigh
upon the bottom line. However, one thing that instilled
confidence was that unlike the second quarter, total revenue in
the third quarter beat the Zacks Consensus Estimate of $5,106
million.
Manpower provided a dismal fourth-quarter 2012 outlook. The
company now expects earnings between 72 cents and 80 cents a
share, reflecting a year-over-year decline of 26.5% to 18.4%,
respectively. Management now projects total revenue to decline
between 5% and 7% in the U.S. dollars, or in the band of 3% to 5%
in constant currency from the prior-year quarter.
Given the pros and cons, we prefer to remain on the sidelines.
Manpower, 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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