Robert Half Beats Q2 Earnings Backed by Growing Labor Market - Analyst Blog


Leading staffing firm Robert Half International Inc. ( RHI ) reported second-quarter 2014 earnings of 55 cents per share, ahead of the prior-year quarter adjusted earnings of 46 cents by 19.6%. Earnings also beat the Zacks Consensus Estimate by 5.8%.

Robert Half witnessed strong year-over-year earnings growth driven by solid demand for services provided by skilled professionals as well as growing labor market in the U.S. The company's international operations also improved, particularly driven by permanent placement services. In fact, the company's earnings have now grown in double digits for 17 consecutive quarters on a year-over-year basis, driven by growing demand for skilled workforce and consulting services.

Robert Half International Inc - Earnings Surprise | FindTheBest

Robert Half's total revenue was in line with the Zacks Consensus Estimate and grew 9.6% year over year to $1.16 billion in the second quarter, driven by solid performance in the company's permanent placement and technology staffing divisions. Protiviti operations also delivered strong revenues in the quarter.

Margin Details

Total gross profit was $478.4 million in the reported quarter, up 10.7% year over year. Gross margin expanded 50 basis points (bps) to 41.1% in the second quarter driven by higher sales.

Total operating income increased 22.7% to $123.6 million in the quarter. Operating margin increased 110 bps to 10.6% in the quarter on the back of higher gross margins and solid Protiviti results.

Segment Details

Based on the nature of services, the company has three reportable operating segments namely, Temporary and Consultant Staffing; Permanent Placement Staffing and Risk Consulting and Internal Audit Services. Revenues from Temporary and Consultant Staffing and Permanent Placement Staffing come under the global staffing division, while the Risk Consulting and Internal Audit Services are provided under the Protiviti division.

Global Staffing Division: Global Staffing revenues increased 8.7% in the quarter, driven by 8.2% growth in the Temporary and Consultant Staffing division and 13.8% growth in Permanent Placement Staffing. However currency had a negative impact of 0.4% during the quarter. Global Staffing revenues, on a constant currency basis, increased 8.9% year over year, driven by 10.3% growth in the U.S. and a 4.4% improvement in international staffing revenues in the quarter.

Overall staffing gross margin expanded 70 bps to 43.0%, led by solid margin of 36.5% in the Temporary and Consultant Staffing operations and 100.0% margin in Permanent Placement operations.

Operating margin of the staffing division was 20% , led by 9.7% margin in Temporary and Consultant Staffing operations and strong margin of 21.8% in Permanent Placement operations.

Protiviti: Global revenues for Protiviti improved 14.4% year over year in the second quarter, driven by 18.4% growth in U.S. revenues. However, international revenues declined 0.2%.

Gross margin was 28.4% of Protiviti revenues, down 20 bps from the year-ago quarter due to higher cost of services.

Operating margin was 8.2% of Protiviti revenues, up 150 bps from the year-ago quarter due to higher sales and gross margins in Protiviti.

Financial Update

Robert Half had cash and cash equivalents of $307.8 million at the end of the second quarter versus $267.7 million at the end of the first quarter. Capital expenditure was $10.6 million in the second quarter as against $12.41 million in the first quarter.

Third Quarter Guidance

The company issued earnings and sales guidance for the third quarter of 2014. Robert Half expects revenues in the range of $1.17-$1.22 billion in the third quarter, up from $1.07 billion in the year-ago quarter. The company expects earnings in the range of 55-60 cents per share, up from 48 cents earned in the prior-year quarter.

Robert Half carries a Zacks Rank #4 (Sell). Better-ranked stocks worth considering in the business services sector include ManpowerGroup Inc. ( MAN ) and CTPartners Executive Search Inc. ( CTP ) . While Manpower sports a Zacks Rank #1 (Strong Buy), CTPartners carries a Zacks Rank #2 (Buy). Another stock worth considering in the consumer staples sector is Columbia Sportswear Company ( COLM ) , carrying a Zacks Rank #1.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: MAN , COLM , RHI , CTP

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