ManpowerGroup (MAN) Beats On Q2 Earnings, Revenues Fall

ManpowerGroup, Inc.’s (NYSE:MAN) second-quarter 2016 earnings of $1.60 per share increased 20.3% year over year and beat the Zacks Consensus Estimate of $1.52. The company has been delivering better-than-expected earnings for seven years now. Its shares were up 2%, following the quarterly numbers.

However, earnings were hurt by 2 cents due to foreign currency headwinds. On a currency-neutral basis, the bottom line surged 22% year over year.

Forex headwinds also hampered top-line growth. Though revenues inched up 3.3% year over year to $5,022.1 million, the top line fell short of the Zacks Consensus Estimate of $5,057 million. On a constant currency basis, revenues jumped 4.5%. The company’s revenue miss was primarily due to weaker-than-expected sales in the U.S. and France.

Gross profit increased 3.6% (up 4.5% in constant currency) to $860.7 million, while gross margin came in at 17.1%, flat year over year. In the reported quarter, staffing gross margin had a 30 basis point impact on overall gross margin, primarily due to business mix and an increase in direct costs. Operating profit of $196 million increased 9.7% (up 10.4% in constant currency) from the year-ago quarter.

Performance of the Segments

Revenues from the United States fell 4.9% year over year to $725.3 million. Moreover, the segment’s operating profit declined 4% from the prior-year figure to $40 million.

In Other Americas, revenues decreased 3.3% (up 14.2% in constant currency) to $355.7 million, while operating profit fell 4.6% (up 11.8% in constant currency) to $13.8 million.

In France, revenues increased 4.1% year over year (up 2.2% in constant currency) to $ 1,252.2 million, while operating profit improved 0.9% (down 0.9% in constant currency) to $67.5 million.

In Italy, revenues were down 6.1% year over year (down 7.8% in constant currency) to $299.8 million. The segment’s operating profit rose 15% (up 13% in constant currency) to $22.8 million.

In Other Southern Europe, revenues grew 9% (up 7.4% in constant currency) to $379.4 million. Operating profit jumped 49% (up 47.7% in constant currency) to $12.0 million.

In Northern Europe, revenues surged 7.3% (up 10% in constant currency) to $1,322.3 million, while operating profit was up 10.8% (up 12.9% in constant currency) to $37.8 million, both on a year-over-year basis.

In APME (Asia Pacific Middle East), revenues climbed 10.4% to $614.6 million (up 9.6% in constant currency) year over year. The segment’s operating profit grew 20.7% (up 19% in constant currency) to $22.2 million year over year.

Also, revenues from Right Management inched up 0.9% (up 2.6% in constant currency) year over year to $72.8 million. The company’s operating income surged 23.6% to $14.5 million (up 25.9% in constant currency) from the year-ago period.

Other Financial Details

ManpowerGroup ended the quarter with cash and cash equivalents of $546.3 million, long-term debt of $829.8 million, and shareholders’ equity of $2,514.8 million.

The company generated cash worth $262.1 million from operating activities and incurred capital expenditure of $30.8 million in the reported quarter.

Also, during the second quarter, the company repurchased 2.3 million for about $173 million. At the end of the reported quarter, the company had 1.5 million shares remaining under its 6 million buyback authorization made in Oct 2015.

Guidance

Despite volatile macroeconomic conditions, the company remains optimistic about its future performance on the back of its strategic initiatives.

Including a negative effect of 3 cents from foreign exchange, ManpowerGroup expects third-quarter 2016 earnings per share in the range of $1.66–$1.74. The Zacks Consensus Estimate for the third quarter stands at $1.71.

On a constant currency basis the company expects revenue growth in the range of 1–3%.

The company expects revenue growth in the Americas as well as Southern Europe to be in the flat to lower single-digit range. For Northern Europe and APME, it anticipates revenue growth in the upper mid-single-digit range.

Zacks Rank and Other Stocks to Consider

ManpowerGroup, which shares space with On Assignment Inc. (NYSE:ASGN) , currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same industry include BG Staffing, Inc. (NYSE:BGSF) and TrueBlue, Inc. (NYSE:TBI) . BG Staffing sports a Zacks Rank #1 (Strong Buy) whereas TrueBlue holds a Zacks Rank #2 (Buy).