Manpower: Earnings Preview

| About: ManpowerGroup Inc. (MAN)

Manpower, Inc. (NYSE:MAN), the global leader in the employment services industry, is scheduled to report its first-quarter 2012 financial results on Friday, April 20, 2012.

The current Zacks Consensus Estimate for the quarter is 35 cents a share, which reflects a decline of 18.6% from the prior-year quarter's earnings of 43 cents. The estimates in the current Zacks Consensus range between a low of 32 cents and a high of 37 cents a share. The Zacks Consensus estimates revenue at $5,001 million for the first quarter.

Recap of Fourth-Quarter 2011

On February 1, 2012, Manpower delivered fourth-quarter 2011 results. The company posted better-than-expected fourth-quarter 2011 results on the back of revenue growth with emerging markets portraying robust trends, in particular Asia. Better expense control also provided cushion to the bottom line.

However, Manpower projects a cautious outlook for first-quarter 2012. The company warned that the softness in the current economic environment is likely to persist in 2012. Management alarmed that the ongoing turmoil in Europe could be a potential threat to job creation.

The quarterly earnings of 98 cents a share beat the Zacks Consensus Estimate of 87 cents and soared 48.5% from 66 cents earned in the prior-year quarter.

Milwaukee, Wisconsinbased Manpower, said that total revenue for the quarter rose 5.3% to $5,484 million from the prior-year quarter, and 5.8% in constant currency. However, the quarterly revenue fell short of the Zacks Consensus Estimate of $5,560 million.


Manpower now expects first-quarter 2012 earnings in the range of 30 cents to 38 cents a share, including an unfavorable impact of foreign currency translation of 2 cents.

(Refer the article: Manpower Beats on EPS, Stays Wary)

Zacks Agreement & Magnitude

No movement was noticed in the Zacks Consensus Estimate for the first quarter either in the last 30 or last 7 days, since none of the 13 analysts covering the stock revisited their estimates.

Positive Earnings Surprise History

With respect to earnings surprises, Manpower has topped the Zacks Consensus Estimate over the last four quarters in the range of 2.1% to 34.4%. The average remained at 14.8%. This suggests that Manpower has beaten the Zacks Consensus Estimate by an average of 14.8% in the trailing four quarters. Given its past performance we expect the company to outperform the Zacks Consensus Estimate.

Manpower is Neutral

Manpower's comprehensive range of services makes it a true global staffing firm. The company provides services for the entire employment and business cycle including permanent, temporary and contract recruitment, employee assessment and selection, training, outplacement, outsourcing and consulting.

The company's brand value and strong global network provides it a competitive advantage and reinforces its dominance in the market. Manpower leverages a strong network of about 3,800 offices, spanning 80 countries and serving approximately 400,000 clients. It benefits from growth prospects in under-penetrated staffing markets.

However, Right Management continues to struggle due to an 8% (in constant currency) fall in the counter-cyclical outplacement business during the fourth quarter of 2011. Revenue from Right Management services dropped 8.2% to $79.8 million and 8.6% in constant currency. Management now anticipates Right Management business to be down between 7% and 9% in constant currency in the first quarter of 2012.

We currently maintain our long-term "Neutral" recommendation on the stock. However, Manpower, which competes with Kelly Services Inc. (NASDAQ:KELYA), holds a Zacks #1 Rank that translates into a short-term "Strong Buy" rating, and well defines the company's strategy of exiting lower margin business and venturing into high margin business in the coming quarters.

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Tagged: , Staffing & Outsourcing Services, Earnings, India
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