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ManpowerGroup (MAN) Q2 Earnings Meet Estimates, Revenues Lag

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ManpowerGroup (MAN) Q2 Earnings Meet Estimates, Revenues Lag

ManpowerGroup (MAN) continues to see strong growth in its solutions business, especially in RPO, which witnessed double-digit year-over-year revenues and gross profit growth in the second quarter.

ManpowerGroup Inc.’s MAN second-quarter 2018 earnings per share (excluding restructuring cost) came in at $2.35, in line with the Zacks Consensus Estimate and within the guided range of $2.33-$2.41. The bottom line was up 29.1% on a year-over-year basis.

Revenues of $5.66 billion lagged the consensus estimate by $178 million but improved 9.3% year over year on a reported basis and 4.5% on a constant-currency basis. The constant-currency growth rate was below the company’s guided range of 5-7%. The year-over-year increase was backed by positive currency impact of 9% and contribution of 30 basis points from acquisitions.

ManpowerGroup continues to see solid growth at its solutions business, especially in RPO, which witnessed double-digit year-over-year revenues and gross profit growth in the second quarter. The Proservia business gained strength in Europe and France.

The company looks well poised on the back of skilled professionals, technological advancements, brand value and strong global network. Additionally, Trump administration’s business-friendly approach, a strong U.S. economy, robust manufacturing and non-manufacturing activity and improvements in the labor market augur well for ManpowerGroup.

These tailwinds may lift the company’s share price going forward. Shares have declined 11.9% in the past three months against the industry’s rally of 5.4%.

Let’s delve deeper in to the numbers.

Segmental Revenues

Revenues from America totaled $1.05 billion, down 0.4% year over year on a reported basis but up 1.9% on a constant-currency basis. Solid revenue growth at Other Americas’ sub group was partially offset by revenue decline in the United States. The segment contributed 18% to total revenues.

Revenues from Southern Europe were up 14% on a reported basis and 5.8% on a constant- currency basis to $2.43 billion. Strong revenue growth was witnessed across France, Italy and Other Southern Europe. The segment contributed 43% to total revenues.

Northern Europe revenues grew 8.7% on a reported basis and 2.2% on a constant-currency basis to $1.39 billion. The uptick was driven by strong growth in the UK, Norway, Poland, Finland and Russia. The segment accounted for 25% of total revenues in the reported quarter.

APME revenues summed $724.8 million, up 12.6% on a reported basis and 10.4% on a constant -currency basis. The improvement was backed by growth in Australia, New-Zealand, Japan, China, India, Thailand, Malaysia, Singapore and Vietnam. The segment contributed 13% to total revenues.

Revenues from the Right Management business declined 8.3% year over year on a reported basis and 10.5% on constant-currency basis to $52.4 million. The downside can be attributed to  reduced outplacement activity.

ManpowerGroup Revenue (TTM)

ManpowerGroup Revenue (TTM) | ManpowerGroup Quote

Operating Performance

Gross profit in the second quarter was $922.7 million, up 7.1% year over year on a reported basis and 2.8% on a constant-currency basis. Gross profit margin came in at 16.3%, down 40 basis points (bps) year over year on a reported basis and 30 bps on a constant-currency basis.

Operating profit of $208.3 million was up 6.7% year over year on a reported basis and 2.2% on a constant-currency basis. Operating profit margin came in at 3.7%, down 10 basis points year over year.

The America segment’s operating profit came in at $56.7 million, down 1.4% year over year on a reported basis and 0.7% on a constant-currency basis. Operating profit from Southern Europe was $121.7 million, up 9.8% on a reported basis and 2.4% on a constant-currency basis.

APME registered an operating profit of $29.2 million, which improved 25.5% on a reported basis and 23.1% on a constant-currency basis. The Northern Europe segment’s operating profit declined 25.7% year over year on a reported basis and 29.7% on a constant-currency basis to $24.7 million.

The Right Management segment’s operating margin was $10.5 million, up 23.2% on a reported basis and 21.1% on a constant-currency basis.

Balance Sheet and Cash Flow

ManpowerGroup exited second-quarter with cash and cash equivalents balance of $767.5 million compared with $552.2 million in the prior quarter. Long-term debt at the end of the quarter was $1.05 billion compared with $491.1 million in the preceding quarter.

The company generated $175.6 million of cash from operating activities in the first six months of 2018. It repurchased shares for $113.2 million and paid dividend of $66 million during the same time period.

Third Quarter Outlook

ManpowerGroup anticipates third-quarter earnings per share to be in the range of $2.37-$2.45, lower than the Zacks Consensus Estimate of $2.49. The guidance includes a negative impact of 5 cents from foreign currency.

Revenues are expected to grow between 4% and 6% on a constant-currency basis. Acquisitions are expected to positively impact the top line by 20 basis points. Further, the company expect its income tax rate in third-quarter 2018 to be around 27%.

Zacks Rank & Stocks to Consider

Currently, ManpowerGroup has a Zacks Rank #4 (Sell).

Some better-ranked stocks in the broader Business Services sector include WEX WEX, IQVIA Holdings IQV and Paychex PAYX. All these stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The long-term expected earnings per share growth rate for WEX, IQVIA Holdings and Paychex is 15%, 11.8% and 8.2%, respectively.

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