Summary:
ManpowerGroup continues to impress investors with better-than-expected bottom-line
results for more than four years. In first-quarter 2016, earnings of $0.98 per share
soared 18.1% year over year and also beat the Zacks Consensus Estimate of $0.93.
On the revenue front, the company continues to struggle and missed the Zacks
Consensus Estimate for the three straight quarters. The strengthening U.S. dollar will
continue to affect ManpowerGroup’s quarterly performance as the international
markets contribute nearly 85% of its revenues. The company’s impressive firstquarter
2016 performance and the strategic progress made by it in 2015, reflects the
efficiency of its management team. Despite volatile macroeconomic conditions, the
company remains optimistic about its future performance on the back of its strategic initiatives.
Reasons To Buy:
Encouraging Performance across Several Key Markets: In first-quarter 2016,
ManpowerGroup registered 5% growth in revenues on a constant currency basis driven by
encouraging performance in Other Americas, France, Other Southern Europe and APME (Asia
Pacific Middle East). Region wise, Other Southern Europe with 5.8% increase in revenues
performed better than Northern Europe that reported 4.1% rise. The company expects revenue
growth in the Americas as well as Southern Europe to be in the mid-single-digit range. For
Northern Europe and APME, the company expects revenue growth in the upper-single-digit
range.
In APME region, revenues increased 12.1% driven by the Greythorn buyout. Japan, where the company has the largest operation in
this region, reported 4% revenue growth. The company also noted steady improvement in demand environment in Korea, India and
Philippines. Overall, Permanent Recruiting business is doing well as is reflected by the 25% revenue growth on a constant currency
basis. Therefore, to make the most of the opportunities presented by the Permanent Recruitment market, ManpowerGroup is
continuously making significant investments to expand permanent recruitment solutions offerings. Management continues to believe
that global recovery is on track but at a slow and uneven pace. As a result, management is focusing on internal drivers like
disciplined pricing and tough control on productivity to ensure uninterrupted profitability.
Shareholder Friendly Activities: ManpowerGroup remains a good bet for growth and yield-seeking investors. During the first
quarter, the company repurchased 1.5 million of shares for about $180 million. At the end of the reported quarter, the company had
3.8 million shares remaining under its 6 million buyback plan authorized in Oct 2015. The company continues to focus on
maximizing shareholder wealth, going ahead.
Better-than-Expected Bottom Line: ManpowerGroup has been delivering better-than-expected bottom-line results for nearly seven
years. In first-quarter 2016 earnings of $0.98 per share increased 18.1% year over year and also beat the Zacks Consensus
Estimate of $0.93. However, the quarterly earnings were hurt by $0.03 due to foreign currency headwinds. On a currency-neutral
basis, the bottom line surged 22% year over year. The company’s impressive first-quarter 2016 performance and the strategic
progress made by it in 2015, reflects the efficiency of its management team. Despite volatile macroeconomic conditions, the
company remains optimistic about its future performance on the back of its strategic initiatives.
Brand Value & Range of Services Provides Competitive Edge: ManpowerGroup’s wide range of services makes the company a
true global staffing firm. The company provides services for the entire employment and business cycle including permanent,
temporary and contract recruitment, employee assessment and selection, training, outplacement, outsourcing and consulting. The
company’s brand value and strong global network provide it a competitive advantage and reinforces its dominant position in the
market. The company leverages a well-established network of 3,000 offices across 80 countries and serves approximately 400,000 clients.
Reasons To Sell:
Currency Headwinds: The strengthening U.S. dollar will continue to affect ManpowerGroup’s
quarterly performance as nearly 85% of its revenues is derived from the international markets.
Currency volatility had a $0.03 per share negative impact on first-quarter earnings.
Management expects currency fluctuations to persistently hurt the top line and the bottom line.
Foreign currency headwinds are likely to hamper revenue growth by $0.02 per share during the
second quarter of 2016.
Weaker-than-Expected Top Line Raises Concern: ManpowerGroup’s top line missed the
Zacks Consensus Estimate in the trailing three quarters with an average miss of 1.2%. In firstquarter
2016, the top line of $4,587.7 million fell short of the Zacks Consensus Estimate of
$4,620 million primarily due to the negative impact foreign currency exchange rate. The
company expects revenue growth in the Americas as well as Southern Europe to be in the midsingle-digit
range. For Northern Europe and APME, the company expects revenue growth in the
upper single-digit range.
Stiff Competition May Strain Margins: The employment services industry is highly competitive with limited barriers to entry and
ManpowerGroup faces stiff competition in both domestic and international markets from other established players such as Adecco
S.A., Randstad Holding N.V. and Kelly Services Inc. Moreover, it is apprehended that intense competition may limit the company’s
market share and profitability.’
