KELYA Kelly Services Inc

The job market is still sluggish and the economy still not completely awake from its hibernation. But in tough times one has to face headwinds, balance itself and persevere. This is exactly what Manpower Group (MAN) is doing.

Manpower’s comprehensive range of services makes it a truly 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 provides it a competitive advantage and reinforces its dominance in the market. Manpower leverages a strong network of about 3,800 offices, spanning 80 countries and serving approximately 400,000 clients. It benefits from growth prospects in under-penetrated staffing markets.

Efforts helped Manpower to post better-than-expected fourth-quarter 2011 results 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, a fall in demand for the counter-cyclical outplacement services continues to impact the results.

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.

Milwaukee, Wisconsin-based 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.

However, Right Management continues 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.

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.

Manpower, which competes with Kelly Services Inc. (KELYA), 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.

Management now projects total revenue to be flat or marginally up in constant currency for the quarter. Management now anticipates Right Management business to be down between 7% and 9% in constant currency in the first quarter.

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.

The above analysis supports our long-term Neutral stance on ManpowerGroup, the global leader in the employment services industry. Moreover, the company also holds a Zacks #3 Rank that translates into a short-term Hold rating and correlates with our long-term outlook.

 
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