ManpowerGroup
(MAN), the global leader in the
employment services industry, recently posted better-than-expected
third-quarter 2011 results that topped the Zacks’ expectation on
the heels of revenue growth across all regions with emerging
markets portraying robust trends. Better expense control also lent
support to the bottom-line.
However, fall in demand for
the counter-cyclical outplacement services continues to impact the
results. The company also cautioned that the softness in the
current economic environment is likely to persist in 2012. To
counter this, the company is contemplating exiting lower margin
businesses and venturing into the high margin carrying business in
the coming quarters.
The company continues to
register robust demand for Experis end solutions offerings.
Manpower also witnessed a surge in the permanent recruitment
business.
Quarterly
Discussion
The quarterly earnings of
97 cents a share beat the Zacks Consensus Estimate of 95 cents and
soared 56.5% from 62 cents earned in the prior-year quarter. The
foreign currency fluctuation favorably impacted net earnings by 8
cents a share.
Net earnings for the
quarter under review dovetail with management’s guidance range of
90 cents to $1.00 per share.
Milwaukee, Wisconsin based
company, Manpower, said that total revenue for the quarter soared
16.3% to $5,782.3 million from the prior-year quarter, and 8.8% in
constant currency. However, the quarterly revenue fell short of the
Zacks Consensus Estimate of $5,842 million.
We observe that although
cost of services climbed 16.9% to $4,831 million, gross profit rose
13.1% to $951.3 million driven by top-line growth. However, gross
margin contracted 40 basis points to 16.5%. Operating profit surged
45.1% to $158 million, whereas operating profit margin expanded 50
basis points to 2.7%.
Segment
Details
By geographic segments,
revenue from services in the United
States climbed 4% to $828.9
million from the prior-year quarter. Segment operating profit
jumped 24.5% to $32.1 million.
In
Other
Americas, revenue rose 20.2% to
$381.1 million and 17.5% in constant currency, whereas segment
operating profit surged 28% to $10.6 million and 24.6% in constant
currency.
In
France,
revenue grew 18.3% to $1,670.3 million and 8.2% in constant
currency, whereas segment operating profit came in at $27.9
million, up 11.5% from the prior-year quarter, and 2.4% in constant
currency.
In
Italy,
revenue climbed 24.9% to $321 million and 14.4% in constant
currency, whereas segment operating profit soared 68.6% to $19.1
million and 54.6% in constant currency.
In
Other
Southern Europe, revenue grew by 13% to
$206.9 million and 5.2% in constant currency, whereas operating
profit came in at $3 million compared with $3.2 million in the
prior-year quarter.
In
Northern
Europe, revenue increased 16.9%
to $1,595.6 million and 8.5% in constant currency, whereas
operating profit grew 57.7% to $62.8 million and rose 47% in
constant currency.
In
APME
(Asia-Pacific
Middle East), revenue rose 26.2% to $701 million and 14.5% in
constant currency. Segment operating profit jumped 64.4% to $21.7
million and 50.6% in constant currency.
Right
Management continues to struggle due
to a 22% (in constant currency) fall in the counter-cyclical
outplacement business. Revenue from Right Management services
plunged 9.5% to $77.5 million and 13.6% in constant currency. The
third quarter is generally a seasonally slow quarter for Right
Management, which posted an operating loss of $1.9
million.
Financial
Aspects
Manpower ended the quarter
with cash and cash equivalents of $563.5 million, total debt of
$703.4 million, reflecting a debt-to-capitalization ratio of 22%,
and shareholders’ equity of $2,526 million.
The company generated free
cash flows of approximately $100 million. During the quarter, the
company bought back 618,000 shares for $24 million and has a
remaining authorization to repurchase 2.3 million more
shares.
Management
Guided
Manpower now expects
fourth-quarter 2011 earnings in the range of 85 cents to 95 cents a
share, including a favorable impact of foreign currency translation
of 3 cents but excluding reorganization related charges of 15 cents
to 20 cents. The current Zacks Consensus Estimate of 91 cents for
the fourth quarter remains in sync with management’s guidance
range.
Management has projected a
total revenue growth of 5% to 7% in constant currency for the
quarter. On a segment basis, Manpower now expects mid-single digits
growth in the Americas and Europe, and a low double digits growth
in APME.
The company anticipates the
Right Management business to be up sequentially but down between 8%
and 10% from the year-ago quarter. Gross profit margin is expected
to be in the range of 16.9% to 17.1% for the quarter, whereas
operating profit margin is expected between 2.5% and
2.7%.
With a well-established
network of nearly 3,900 offices in more than 80 countries, Manpower
currently offers its services to approximately 400,000 clients. 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, looking at 2012, management projects low to mid
single-digit growth in both revenue and gross profit, in the first
quarter, given the current economic woes.
Currently, we have a
long-term ‘Neutral’ rating on ManpowerGroup. Moreover, the company,
which competes with Kelly Services
Inc. (KELYA) and
Robert
Half International Inc. (RHI), holds a Zacks #3 Rank,
which translates into a short-term ‘Hold’ recommendation, and
correlates with our long-term view.
KELLY SVCS A (KELYA): Free Stock Analysis Report
MANPOWER INC WI (MAN): Free Stock Analysis Report
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