Zacks Industry Outlook Highlights ManpowerGroup, Heidrick & Struggles and GEE Group
For Immediate Release
Chicago, IL – October 2, 2023 – Today, Zacks Equity Research discusses ManpowerGroup, Inc. MAN, Heidrick & Struggles International, Inc. HSII and GEE Group, Inc. JOB.
Industry: Staffing
Link: https://www.zacks.com/commentary/2157691/3-stocks-to-watch-out-for-in-a-challenging-staffing-industry
While service activities are currently in good shape, their positive impacts on the Staffing Firms industry are being partially offset by contracting economic activity in the manufacturing sector.
Successful remote work and increased use of technology are helping ManpowerGroup, Inc., Heidrick & Struggles International, Inc. and GEE Group, Inc. to sail through challenges.
Industry Description
The Zacks Staffing industry is a diverse sector encompassing companies that offer a comprehensive range of human resources and workforce solutions. These services cover various aspects of personnel management, including employment screening, recruitment services for both temporary and long-term job placements, retirement planning, human capital management, payroll administration, performance evaluation, organizational planning, and financial management.
Additionally, some firms within this industry provide specialized services such as staffing and risk consulting, professional staffing, and global business solutions tailored to the needs of small to medium-sized enterprises. They also offer organizational consulting services with a global reach, catering to a wide and varied client base, which includes domestic and international businesses across differe
4 Factors Influencing the Future of Staffing Industry
Stable Demand: The industry is mature, with demand for services remaining stable over time. Revenues, income and cash flows are anticipated to gradually reach the pre-pandemic levels, aiding most industry players to pay out stable dividends.
Increased Adoption of Remote Work and Hybrid Models: The COVID-19 pandemic spurred a rapid rise in remote work adoption, prompting staffing agencies to emphasize remote and hybrid staffing solutions. These flexible work arrangements cater to the needs of clients and job seekers seeking greater work-life balance. As the trend toward remote work persists, staffing agencies are expected to prioritize this approach, enabling them to meet evolving workplace preferences effectively.
Technology Usage Gaining Traction in Staffing: The staffing industry has been increasingly leveraging technology to streamline processes, enhance efficiency, and provide better services. Utilizing tech-driven recruitment methods such as AI, social media, and Big Data are on the rise. Video-conferencing tools like Zoom and Microsoft Teams facilitate remote communication, while cloud and blockchain enhance HR data security, ensuring sustained demand for staffing services.
Unemployment Rate Currently High: In August 2023, there was a notable increase in the unemployment rate, which rose 0.3 percentage points to reach 3.8%. This resulted in an additional 514,000 individuals classified as unemployed, bringing the total to 6.4 million. Furthermore, the Conference Board's Employment Trends Index, a pivotal composite indicator for employment, declined from a revised 114.71 in July to 113.02 in August.
Adding to these concerns, the manufacturing sector has continued to contract for the 10th consecutive month in August, following a 28-month growth period, as reported by supply executives in the latest Manufacturing ISM Report On Business. A decline in gross domestic product (GDP) growth is a cause of worry.
Real GDP for the second quarter of 2023 increased at an annual rate of 2.1%, according to the "third" estimate. In the prior quarter, real GDP had increased 2.2% (revised). In light of these economic indicators, the employment trend suggests that while job gains may persist in the upcoming months, the pace of growth is expected to diminish, potentially leading to job losses in the future.
Zacks Industry Rank Indicates Disappointing Future
The Zacks Staffing Firms industry, which is housed within the broader Zacks Business Services sector, currently carries a Zacks Industry Rank #202. This rank places it in the bottom 17% of more than 240 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates continued outperformance in the near term. Our research shows that the top 50% of Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.
The analysts covering the companies in this industry have been decreasing their estimates. Over the past year, the industry’s consensus earnings estimate for the current year has decreased 29.6%.
Before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock market performance and current valuation.
Industry's Price Performance
The Zacks Staffing Firms industry has lagged the broader Zacks Business Services sector and the Zacks S&P 500 composite over the past year.
The industry has lost 0.3% over this period compared with a 10.1% gain of the broader sector and 17.7% increase of the Zacks S&P 500 composite.
Industry's Current Valuation
On the basis of EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation and amortization), which is commonly used for valuing staffing stocks because of their high debt levels, the industry is currently trading at 5.87X compared with the S&P 500’s 12.75X and the sector’s 24.2X.
Over the past five years, the industry has traded as high as 13.27X, as low as 3.63X and at the median of 7.06X.
3 Staffing Stocks to Keep a Close Eye On
We are presenting three stocks that are well-positioned to grow in the near term.
Gee Group.: This Zacks Rank #1 (Strong Buy) company is a US-based staffing and HR solutions firm, serving various industries like IT, engineering, finance, manufacturing, and healthcare. They provide temporary and permanent staffing, along with consulting and workforce management services. Gee Group's core focus is aligning skilled candidates with job openings while aiding companies in addressing their staffing requirements. You can see the complete list of today’s Zacks #1 Rank stocks here.
GEE Group's robust financial performance, eight quarters of profitability, and strong liquidity position, with no debt and ample resources, reflect their resilience. Significant growth in IT contract services at 59% of professional revenues is notable. Despite economic challenges, the company maintains a positive outlook, focusing on profitability and enhancing shareholder value.
For 2023, the Zacks Consensus Estimate for JOB’s earnings is pegged at 10 cents, 42.9% higher than the year-ago figure. The 2023 estimate of the bottom line has been revised northward by 100% in the past 60 days. The company has a VGM Score of A, which becomes an attractive stock pick when combined with the rank.
Heidrick & Struggles International: This Zacks Rank #1 company is a renowned global executive search and leadership consulting firm headquartered in the United States. It specializes in identifying high-level executive talent for organizations, including CEOs and board members. The company also provides leadership advisory services to assist clients in improving their leadership teams. With a strong reputation in executive search and leadership consulting, Heidrick & Struggles contributes significantly to shaping corporate leadership dynamics worldwide.
For the third quarter of 2023, HSII expects revenues between $245 million and $265 million, considering typical seasonal patterns. It expects stronger relative performances from On-Demand Talent and Heidrick Consulting, offsetting a slowdown in Executive Search.
For 2023, the Zacks Consensus Estimate for HSII is pegged at $2.77, revised northward by 3.4% in the past 60 days. The company surpassed the earnings estimate in all the four trailing quarters with an average beat of 18.8%. The company currently has a Value Score of B.
ManpowerGroup: This Zacks Rank of 2 (Buy) company is a US-based global workforce solutions provider, offering staffing, talent acquisition, management, and consulting services. They connect job seekers with opportunities and help organizations find the right talent. Operating in 80+ countries, the company is a significant player in HR and staffing, promoting workforce development and offering insights on labor market trends to businesses and policymakers.
ManpowerGroup's cautious third-quarter 2023 outlook anticipates challenges, especially in the United States and Europe, with further weakening in permanent recruitment. Earnings per share are expected to be in the range of $1.32-$1.42, with a positive 8 cents per share foreign currency impact. Revenues, in constant currency, are expected to decrease 3-7%. EBITDA margin is projected to decline 120 basis points, and the effective tax rate is estimated to be 30%. The outlook reflects awareness of current economic challenges and opportunities.
For 2023, the Zacks Consensus Estimate for MAN is pegged at $5.78, which is unchanged in the past 60 days. The company has an earnings surprise history with an average of negative surprise of 1%. The company currently has a Value Score of B.
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ManpowerGroup Inc. (MAN) : Free Stock Analysis Report
Heidrick & Struggles International, Inc. (HSII) : Free Stock Analysis Report
GEE Group Inc. (JOB) : Free Stock Analysis Report
