We reaffirm our Neutral recommendation on
Robert Half International, Inc.
) following the appraisal of third quarter 2012 results. The
company's financial performances were a mixed bag with positive
earnings and topline growth offset by currency translation
headwinds and a tough global employment condition, particularly
Why the Reiteration?
Robert Half has witnessed strong revenue growth in each of its
business segments on the back of strong third quarter 2012
results. Earnings of 41 cents increased 32% from the year-earlier
quarter. Earnings also beat the Zacks Consensus Estimate of 39
cents by 5%. Moreover, the leading global staffing and risk
consulting services provider delivered positive earnings
surprises in 2 of the last 4 quarters with an average beat of
3.7%. The long-term expected earnings growth rate for this stock
Gross margin expanded 40 basis points to 40.2% in the quarter
while operating margin increased 180 basis points to 9.1% on the
back of higher gross margins, lower operating expenses and solid
results of the company's wholly-owned subsidiary, Protiviti.
Overall, we are encouraged by the company's strong demand for
specialized staffing and consulting services, particularly in the
U.S. Further, the improving global economic condition has
heightened the demand for the company's temporary and permanent
staffing services and risk consulting and internal audit
Protiviti contributes majorly in driving revenue and operating
growth and helps companies solve problems in finance, technology,
operations, governance, risk and internal audit. The strong
Protiviti performance has added to the year-over-year growth
rates of U.S. staffing revenues and to the global operating
income in 2012. Recently, Protiviti's purchase of privately-held
SusQtech Inc. helped to meet the growing demand for skilled
workforce as well as provide its key clients with software
However, currency headwinds and tough job scenario,
particularly in Europe, resulted in soft demand for recruitment
services, which keeps us on the sidelines. The company has
witnessed a slowdown of permanent placement for five quarters in
a row. The depleting margins faced by companies have resulted in
cost saving and headcount reduction measures, which have
adversely affected placement firms like Robert Half.
Other Stock to Consider
Another stock in this sector is
) which is also performing well and is worth considering. It
carries a Zacks #3 Rank (Hold).
MANPOWER INC WI (MAN): Free Stock Analysis
ROBT HALF INTL (RHI): Free Stock Analysis
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