How Manpower Balances?


The job market is stubbornly fragile and the economy exceptionally bleak. But in the age of survival of the fittest, one has to face headwinds, balance itself and keep its head high, while passing through every rough patch. This is exactly what ManpowerGroup (NYSE:MAN - News) is doing.

Manpower’s comprehensive range of services makes it 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 provides it a competitive advantage and reinforces its dominance in the market. Manpower leverages a strong network of about 3,900 offices, spanning 80 countries and serving approximately 400,000 clients. It benefits from growth prospects in under-penetrated staffing markets.

Earlier, Manpower had 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, a 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 on exiting lower margin businesses and venturing in high margin carrying businesses in the coming quarters. The company continues to register robust demand for Experis’ end solution offerings.

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 dovetails with management’s guidance range of 90 cents to $1.00 per share.

Milwaukee, Wisconsinbased 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.

Manpower, which competes with Kelly Services Inc. (NasdaqGS:KELYA - News), 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. Management has projected a total revenue growth of 5% to 7% in constant currency for the quarter.

However, Manpower’s Right Management brand continues to struggle due to a drop in demand for the counter-cyclical outplacement services. Revenue from Right Management services plunged 9.5% to $77.5 million and 13.6% in constant currency for the third quarter. The quarter is generally a seasonally slow one for the Right Management, which posted an operating loss of $1.9 million. Management expects Right Management business to decline between 8% and 10% in the fourth quarter of 2011 in constant currency.

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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