Leading staffing firm Robert Half International Inc. (RHI) reported fourth quarter 2012 earnings of 42 cents, beating the prior-year quarter earnings of 30 cents per share by 40%. The results were toward the higher end of management’s expectation of 38 cents to 43 cents. Earnings per share also beat the Zacks Consensus Estimate by a penny. Earnings growth was driven by solid top line and operating income growth.
The company’s earnings have now grown more than 20% year over year for 11 straight quarters driven by growing demand for skilled workforce and consulting services.
We believe that the demand for the company’s services, in particular its staffing services, is highly dependent on the state of the economy and the staffing needs of the company’s clients. A gradual improvement in economic conditions and in job markets in the U.S. has led to a rise in the demand for the company’s specialized staffing and consulting services.
Quarter in Detail
During the quarter, Robert Half's total revenue increased 6.2% to $1.03 billion compared with $973.5 million in the year-ago period on the back of continued demand for skilled professionals on an interim and full-time basis, particularly in U.S. staffing operations. Revenues were within the company’s guidance range of $1.01 to $1.06 billion and in line with the Zacks Consensus Estimate.
Currency exchange rates had an unfavorable impact on the quarter and reduced fourth quarter revenues by 0.3% year over year. However, currencies favorably impacted staffing revenues on a sequential basis.
Gross profit was $416.4 million in the reported quarter, up 7.5% year over year. Gross margin expanded 50 basis points to 40.3% in the fourth quarter as against 39.8% in the prior-year quarter. Operating income increased 35.0% to $97.2 million in the quarter. Operating margin increased 200 basis points to 9.4% in the fourth quarter of 2012 on the back of higher gross margins, lower operating expenses and solid Protiviti results.
All the six segments of the company reported positive revenue growth in the fourth quarter of 2012. Revenue at Accountemps increased 4.2%. Revenue surged 6.4%, both at Office Team and at Robert Half Technology. Revenue at Robert Half Management Resources shot up 8.0% and at Robert Half Finance and Accounting it went up 7.5%. Revenue at Protiviti division jumped 9.7% from the prior-year quarter.
Robert Half’s full year 2012 earnings increased 44.2% to $1.50 per share. However, the results were behind the Zacks Consensus Estimate of $1.55 per share. During the year, Robert Half's total revenue was in line with the Zacks Consensus Estimate but increased 8.7% to $4.1 billion driven by continued demand for skilled professionals over the year.
Robert Half had cash and cash equivalents of $287.6 million at the end of fourth quarter versus $289.4 million at the end of the third quarter. Capital expenditure was $14.0 million in the quarter as against $11.6 million at the end of the third quarter.
Robert Half paid its stockholders a cash dividend of 15 cents per share in the quarter. The company also repurchased 1.2 million shares for a total of $34 million during the quarter. There are approximately 11.4 million shares remaining under the board approved stock repurchase plan.
Robert Half carries a Zacks Rank #3 (Hold). Stocks that are performing well and worth considering in the business services sector include Korn Ferry International (KFY), Manpower, Inc. (MAN) and Assignment Inc. (ASGN). While Korn Ferry carries a Zacks Rank #1 (Strong Buy), both Manpower and Assignment hold a Zacks Rank #2 (Buy).
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