ManpowerGroup
(MAN), the global leader in the employment services industry,
posted third-quarter 2012 results on October 19, 2012. Here we will
discuss the company’s scorecard, based on the recent earnings
announcement, subsequent estimate revisions by analysts as well as
the Zacks Rank and long-term recommendation for the stock.
Last Quarter
Synopsis
ManpowerGroup delivered
better-than-expected third-quarter 2012 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.
However, earnings per share dropped
18.6% year-over-year as the current sluggish macroeconomic
environment resulted in soft demand for recruitment services,
particularly in Europe, and weighed upon its results. Strong dollar
also acted as a deterrent.
Milwaukee, Wisconsin based
Manpower’s total revenue waned 10.5% to $5,172.3 million but came
ahead of the Zacks Consensus Estimate of $5,106 million.
The company now expects fourth
quarter earnings between 72 cents and 80 cents a share, reflecting
an estimated year-over-year decline of 26.5% to 18.4%,
respectively. Management now projects total revenue for the quarter
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.
(Read our full coverage on this
earnings report: Manpower Beats, Profit Dips)
Agreement of Estimate
Revisions
The agreement of estimate revisions
indicates that the analysts were not unidirectional, following
Manpower’s third-quarter 2012 results.
In the last 30 days, 7 out of 13
analysts covering the stock raised their estimates, whereas 2
analysts lowered the same for the fourth quarter of 2012. For the
first quarter of 2013, 4 analysts trimmed their estimates, whereas
2 analysts made upward
revisions.
For fiscal 2012, 11 analysts
revised their estimates upward, and only 1 analyst lowered the same
in the last 30 days. For fiscal 2013, 6 analysts increased their
estimates and 5 analysts made downward revisions.
What Drives Estimate
Revision
Manpower’s better-than-expected top
and bottom line performances instilled confidence among the
analysts who went on to revise their estimates upwards. Further
bolstering their bullish attitude was that the quarterly earnings
per share, which also came ahead of management’s previous provided
guidance range of 64 cents to 72 cents per share.
Moreover, the analysts’ sentiments
were uplifted, as the company is now contemplating on exiting lower
margin business and venturing into high margin business. The
company is also focusing on controlling its expenses. 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.
Despite these, some analysts remain
bearish on the stock and lowered their estimates on account of an
18.6% earnings per share decline in the third quarter and a dismal
fourth quarter outlook. Moreover, analysts remained on the back
foot as the rate of decline in total revenue accelerated
sequentially. After falling 8.1% year over year in the second
quarter of 2012, total revenue dropped 10.5% 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.
However to be noted, that the rate
of decline in the top line projected by management for the fourth
quarter, decelerated from the third quarter, thereby giving
analysts an opportunity to raise their estimates.
Magnitude of Estimate
Revisions
The magnitude of estimate revisions
by the analysts is clearly reflected through changes in the Zacks
Consensus Estimates.
The Zacks Consensus Estimate for
the fourth quarter of 2012 has moved up by 6 cents to 77 cents a
share in the last 30 days. The Zacks Consensus Estimate for the
first quarter of 2013 dropped by 3 cents to 41 cents a share.
For fiscal 2012, the Zacks
Consensus Estimate jumped 14 cents to $2.81 in the last 30 days.
Over the same time frame, the Zacks Consensus Estimate for fiscal
2013 slid by a penny to $2.92.
Closing
Comment
Manpower’s comprehensive range of
services makes the company a true global staffing firm. The
company’s brand value and strong global network provides it with a
competitive advantage and reinforces its dominant position in the
market. However, what compels us to have a cautious view on the
stock is the company’s dwindling top and bottom line performances
as well as soft projections of the same for the fourth quarter.
Currently, we maintain our
“Neutral” recommendation on the stock. Moreover, 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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