) recently announced its Q2 earnings results. Consistent with our
preview note on Monster
, the company witnessed solid growth in its career services
business that expanded 28% over last year. The increase is due to
multiple factors, including a complete integration with Yahoo's (
) HotJobs, solid international growth and indications of increased
hiring in the U.S. The company's Achilles' heel remains its
Internet advertising & fees business, which has posted revenues
that are relatively flat over the last year owing to reduced lead
generation and a
decline in military recruitment
. We also want to see more convincing evidence that Monster is
benefiting from the uptick in the N. America business as
profit margins suffered in this area vs. last year comparables.
Monster competes in the online job search market with niche
players like careerbuilder.com and jobcentral.com and faces growing
competition from social networks like LinkedIn (
), Facebook and Craigslist.
We currently maintain a near
$13 price estimate for Monster stock
, which is about 10% above the current market price. The revised
price includes adjustments made to our forecasts for EBITDA margin
and page views of Monster's website as well as changes to the
company's net cash/debt position.
International Career Services Shows Strength
The major winner for this quarter was the international segment
of Monster's core career services business, which saw an increase
of revenue growth of 30%. The increase in site traffic through
Yahoo's HotJobs is a major contributor to this increase. The EBITDA
margin for the international business grew to 15.5% in Q2 from 2.8%
a year ago.
Revenues also grew organically as Monster launched its Power
Resume Search (
) tool in Germany. Going forward, we expect further growth in
international markets as Yahoo traffic is further directed towards
Monster. This should be further aided by Monster's new portfolio of
tools to counter competition from social networks, such as
Monster's Facebook app BeKnown. ((Monster Launches First Truly
Global Professional Networking App for Facebook with Introduction
of BeKnown, press release, June 27th, 2011)) We thus expect to see
some significant upside in job listings for international career
services for Q3 and Q4, which should lead to division revenues in
the +$460 million bracket for this division.
However to win investors' confidence the company will need to do
more to show that its core U.S. business can scale and maintain its
profit margins. Despite solid 26% revenue growth for N. America,
its operating profit was down 8.3% (though EBITDA was up 5%).
See our complete analysis for Monster