ManpowerGroup
(MAN), the global leader in the employment services industry,
recently posted fourth-quarter 2011 results that topped the Zacks’
expectations. The company’s strong performance came on the back of
revenue growth with emerging markets portraying robust trends,
particularly Asia. Better expense control also provided cushion to
the bottom-line.
However, Manpower projects a
cautious outlook for first-quarter 2012. The company warned that
the softness in the current economic environment is likely to
persist in 2012. Management alarmed that the ongoing turmoil in
Europe could be a potential threat to creating new jobs.
To counter this, the company is
contemplating on exiting lower margin business and venturing into
high margin business in the coming quarters. Manpower also
witnessed a surge in permanent recruitment business. The demand for
the counter-cyclical outplacement services portrayed some signs of
steadiness, but it continued to contract.
Let’s Unveil the
Picture
The quarterly earnings of 98 cents
a share beat the Zacks Consensus Estimate of 87 cents and soared
48.5% from 66 cents earned in the prior-year quarter. Net earnings
for the quarter also exceeded management’s forecast of 85 cents to
95 cents a share.
On a reported basis, including
one-time items, quarterly earnings came in at 78 cents,
substantially higher from a loss of $4.29 per share delivered in
the year-ago quarter.
The reported quarter’s earnings
include a reorganization charge of 20 cents a share, associated to
office consolidations and severance costs. Management hinted that
the charges incurred will result in savings of over $30 million in
2012. On the other hand, the prior-year quarter includes a goodwill
and intangible asset impairment charge of $4.70 and reorganization
charge of 25 cents a share.
Milwaukee, Wisconsinbased company,
Manpower, said that total revenue for the quarter rose 5.3% to
$5,484 million from the prior-year quarter, and 5.8% in constant
currency. However, the quarterly revenue fell short of the Zacks
Consensus Estimate of $5,560 million. Revenue growth dovetails with
management’s projection of 5% to 7% increase, in constant
currency.
We observe that although cost of
services climbed 5.7% to $4,548.8 million, gross profit rose 3.3%
to $935.2 million driven by top-line growth. However, gross margin
shriveled 30 basis points to 17.1%, principally due to a 30 basis
points contraction in temporary recruitment gross margin and a 10
basis points decline in higher-margin outplacement business.
Manpower posted operating profit of
$129.8 million compared with an operating loss of $342.6 in the
prior-year period. However, excluding one-time items, adjusted
operating income came in at $150.3 million, up 29% year-over-year,
whereas operating margin expanded 50 basis points to 2.7%.
Segment
Details
By geographic segments, revenue
from services in the United States edged down 1.4%
to $765.9 million from the prior-year quarter. However, segment
operating profit surged 83.8% to $26.1 million.
In Other Americas,
revenuerose 12.1% to $389.8 million and 18.3% in constant currency,
whereas segment operating profit jumped 22.6% to $12.1 million and
30.9% in constant currency.
In France, revenue
grew 5.4% to $1,511 million and 6.3% in constant currency, whereas
segment operating profit jumped 71% to $20.5 million and 72.4% in
constant currency.
In Italy, revenue
climbed 3.8% to $305.3 million and 4.6% in constant currency,
whereas segment operating profit soared 24.3% to $19.7 million and
25.4% in constant currency. The rate of growth in revenue subdued
from third quarter’s increase of 14.4% in constant currency due to
European sovereign debt crisis and local economic
turbulence.
In Other Southern
Europe, revenue grew 3.9% to $196.3 million and 6.5% in
constant currency, whereas operating profit came in at $2.9
million, up 3.6% and 8.8% in constant currency.
In Northern
Europe, revenue increased 3.2% to $1,540.9 million and
3.8% in constant currency, whereas operating profit fell 17.7% to
$51.8 million and 17.8% in constant currency.
In APME
(Asia-Pacific Middle East), revenue rose 18.2% to $695 million and
14.5% in constant currency. Segment operating profit came in at
$21.7 million compared with $9.6 million in the prior-year
quarter.
Right
Managementcontinues to struggle due to an 8% (in constant
currency) fall in the counter-cyclical outplacement business.
Revenue from Right Management services dropped 8.2% to $79.8
million and 8.6% in constant currency. Right Management posted an
operating loss of $5.6 million compared with a loss of $16.8
million in the year-ago period.
Financial
Aspects
Manpower ended the quarter with
cash and cash equivalents of $580.5 million, total debt of $700.2
million, reflecting a debt-to-capitalization ratio of 22%, and
shareholders’ equity of $2,483.4 million.
During the quarter, the company
generated a free cash flow of approximately $125 million and bought
back 1.7 million shares for $62 million. In fiscal 2011, the
company repurchased 2.6 million shares for $105 million. The
company still has a remaining authorization to repurchase 3.6
million more shares.
Strolling through
Guidance
Manpower now expects first-quarter
2012 earnings in the range of 30 cents to 38 cents a share,
including an unfavorable impact of foreign currency translation of
2 cents. The current Zacks Consensus Estimate for the quarter is 33
cents.
Management now projects total
revenue to be flat or marginally up in constant currency for the
quarter. On a segment basis, Manpower expects revenue growth to
remain flat or marginally up in the Americas and Northern Europe,
and to be flat or marginally down in Southern Europe. Revenue
growth across APME is expected between 7% and 9% in constant
currency, gaining from growth in emerging markets and modest
improvement in Japan.
The company anticipates Right
Management business to be down between 7% and 9% in constant
currency from the year-ago quarter. Gross profit margin is expected
to be in the range of 16.6% to 16.8%, whereas operating profit
margin is expected between 1.4% and 1.6%, reflecting a decline of
20 basis points from the year-ago quarter.
With a well-established network of
nearly 3,800 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 into 2012,
management remains cautious due to 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 #4 Rank that translates into a short-term ‘Sell’
recommendation.
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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