It has been about a month since the last earnings report for Robert Half (RHI). Shares have added about 8.3% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Robert Half due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Robert Half Q1 Earnings Miss Estimates
Robert Half reported mixed first-quarter 2020 results, with earnings missing the Zacks Consensus Estimate and revenues beating the same.
Quarterly earnings of 79 cents per share missed the consensus mark by 2.5% and were down 15% year over year. Revenues of $1.51 billion marginally beat the consensus mark and increased 3% year over year on a reported basis and 2% on an as-adjusted basis.
Staffing Revenues Decline, Protiviti Up Significantly
Global Staffing revenues of $1.21 billion declined 0.3% year over year on a reported basis and 1% on an as-adjusted basis. This decline was mainly due to the negative impact of COVID-19 on staffing operations. The U.S. staffing revenues of $944 million were down 0.2% on an adjusted basis. Non-U.S. staffing revenues were down 4% on an as-adjusted basis to $269 million. Currency movements had an unfavorable impact of 0.7% on staffing revenues.
The quarter had 63.1 billing days compared with 62.2 billing days in the year-ago quarter. At present, Robert Half operates 327 staffing locations worldwide, with 88 locations situated in 17 countries outside the United States.
Protivitirevenues came in at $294 million, which increased 16.5% year over year on a reported basis and 15% on an as-adjusted basis. This increase was driven by strength across internal audit, technology consulting and regulatory compliance consulting, and services provided jointly with staffing. The U.S. and non-U.S. Protiviti revenues increased a respective 20% and 2%, year over year, on an as-adjusted basis.
Currency movement lowered revenue growth by 0.6% on a year-over-year basis. Currently, Protiviti, along with its independently-owned Member Firms, has a network of 86 locations in 27 countries.
Costs Escalate, Margins Shrink
Gross profit in the quarter was $610.7 million, up 0.5% year over year. Gross margin of 40.5% shrunk 90 basis points (bps) year over year. Operating income of $131.1 million was down 10.3% year over year. Operating margin declined to 8.7% from the year-ago quarter’s 10%.
Selling, general and administrative expenses as percentage of total revenues were 31.8%, up 40 bps year over year. The upswing resulted from negative leverage as revenues declined in response to the pandemic.
Key Balance Sheet & Cash Flow Figures
Robert Half ended the first quarter with cash and cash equivalents of $249.9 million compared with the $270.5 million witnessed at the end of the previous quarter. Cash flow from operations was $125 million and capital expenditures were $14 million in the quarter.
In the March-end quarter, Robert Half bought back around 1 million shares for $51 million. It paid out $40 million in dividends.
How Have Estimates Been Moving Since Then?
Fresh estimates followed a downward path over the past two months. The consensus estimate has shifted -38.81% due to these changes.
At this time, Robert Half has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Robert Half has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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