Effective cost management and tax
credits earned in France facilitated the global leader in the
employment services industry, ManpowerGroup Inc.
(MAN), to come up with better-than-expected first-quarter 2013
results.
The company’s adjusted quarterly
earnings came in at 63 cents a share, substantially surpassing the
Zacks Consensus Estimate of 45 cents and jumping 26% year over
year. However, including one time items, earnings came in at 31
cents a share. The company stated that earnings per share were
negatively impacted by a penny on account of foreign currency
fluctuations.
Revenue &
Margins
Total revenue dropped 6.4% (5.8% in
constant currency) year over year to $4,768.9 million and missed
the Zacks Consensus Estimate of $4,774 million.
Lingering macroeconomic woes
continue to deter the financials of the company. Sequentially, the
demand for the counter-cyclical outplacement services moderated
significantly during the quarter. Revenues at the company’s
outplacement business were up 1% year over year, marking a major
decline from 16% growth witnessed during the fourth quarter of
2012.
We observe that although cost of
services decreased 6.4% to $3,978.8 million, gross profit fell 6.8%
to $790.1 million due to a decline in the top line. However, the
company’s gross profit margin remained flat at 16.6% during the
quarter.
Manpower posted operating profit of
$54.4 million, down 42% from the prior-year period, whereas
operating margin contracted 70 basis points to 1.1%.
Manpower is now contemplating on
exiting lower margin business and venturing into high margin
business. The ManpowerGroup Solutions, the company’s high margin
business, sustained its growth momentum during the quarter.
Alongside, Manpower is focusing on abridging costs.
Operating
Groups
By geographic segments, revenues
from services in the United States fell 4% to
$706.1 million from the prior-year quarter. However, segment
operating profit increased 7.9% to $7.4 million, reflecting better
pricing and lower employment tax cost.
In Other Americas,
revenues declined 3.9% (1.4% in constant currency) to $386.9
million, whereas segment operating profit plunged 43.1% (43.6% in
constant currency) to $8.7 million.
In France,
revenues fell 11.3% (11.8% in constant currency) to $1,145.2
million, whereas segment operating profit nearly tripled to $14.3
million, benefiting from tax credits.
In Italy, revenues
fell 3.6% (4.1% in constant currency) to $257.9 million, whereas
segment operating profit tumbled 19.5% (19.9% in constant currency)
to $11.7 million, reflecting competitive pricing.
In Other Southern
Europe, revenues edged down 0.9% (1.9% in constant
currency) to $193.4 million, whereas operating profit came in at
$2.3 million, down 33.8% (35.4% in constant currency) from the
prior-year quarter.
In Northern
Europe, revenues slipped 5.1% (5.6% in constant currency)
to $1,370.3 million, whereas operating profit plunged 75.8% (75.6%
in constant currency) to $10.6 million, reflecting pricing pressure
and decline in permanent recruitment.
In APME
(Asia-Pacific Middle East), revenues came in at $632.5 million,
down 7% (1.4% in constant currency) from the prior-year quarter.
Segment operating profit decreased 25.2% (19.4% in constant
currency) to $14.8 million.
Revenues from Right
Management decreased 3.8% (2.5% in constant currency) year
over year to $76.6 million. The company posted operating income of
$2 million, down 18.4% (7.5% in constant currency) from the
year-ago quarter.
Other Financial
Details
Manpower ended the quarter with
cash and cash equivalents of $583.4 million, total debt of $751
million and shareholders’ equity of $2,501.1 million, reflecting a
debt-to-capitalization ratio of 23.1%. The company has no
borrowings under its $800 million revolving credit facility. It
incurred capital expenditures of $13 million during the
quarter.
Guidance
Manpower now expects second-quarter
2013 earnings in the range of 84 cents – 92 cents per share.
Management anticipates second-quarter total revenue to decline
between 3% and 5% in constant currency and at an equivalent rate in
U.S. dollars from the prior-year quarter.
Revenues in the Americas are
expected to remain flat, while it is expected to decline in the
range of 8% and 10% in Southern Europe. Northern Europe revenues
are projected to decrease in the range of 1% – 3%. The company
expects APME and Right Management segments to register a decline in
the low-single-digit in revenues.
Going forward, Manpower expects to
generate higher gross margin from the Americas and Southern Europe,
which in turn is expected to boost the overall gross margins of the
company. Operating margin is expected to improve during the second
quarter and is projected to be in the range of 2.5% – 2.7%.
With a well-established network of
approximately 3,500 offices in about 80 countries, Manpower
currently offers its services to about 400,000 clients. We believe
Manpower’s brand value, comprehensive range of services and a
strong global network provide a competitive advantage over its
peers Robert Half International Inc. (RHI),
Kelly Services, Inc. (KELYA) and
Korn/Ferry International (KFY) and reinforces its
dominant position in the market. Currently, the stock carries a
Zacks Rank #3 (Hold).
KELLY SVCS A (KELYA): Free Stock Analysis Report
KORN/FERRY INTL (KFY): Free Stock Analysis Report
MANPOWER INC WI (MAN): Free Stock Analysis Report
ROBT HALF INTL (RHI): Free Stock Analysis Report
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