ManpowerGroup Banks On Acquisitions Amid Stiff Competition

ManpowerGroupInc.’s (NYSE:MAN) brand value and strong global network lend it a competitive edge and fortify its dominant position in the market.

The company reported solid first-quarter 2018 results, wherein earnings and revenues surpassed the Zacks Consensus Estimate. Earnings of $1.72 per share beat the consensus mark by 7 cents and increased 57.8% year over year. Revenues came in at $5.5 billion, which outpaced the consensus mark of $5,376.8 million and was up 16.1% year over year on a reported basis and 5.4% on a constant-currency basis.

Also, ManpowerGroup has an impressive earnings surprise history. The company surpassed the Zacks Consensus Estimate in each of the trailing four quarter, with an average beat of 4.2%.

However, in the past year, shares of the company have declined 11% against the 21.5% rally of the industry it belongs to.

Acquisitions Strengthening Portfolio

Acquisitions have been a key catalyst for ManpowerGroup, which helped it to strengthen the company’s diversified portfolio. In fact, it has been acquiring and investing in companies globally. Some of the notable acquisitions include LearnUp, a recruitment company acquired in 2017, and CIBER — a global information technology consulting, services and outsourcing company bought in 2016.

Notably, acquisitions contributed 50 basis points to first-quarter 2018 revenues. The company expects buyouts to positively impact its top line by 40 basis points in second-quarter 2018.

ManpowerGroup Revenue (TTM)

Global Footprint Strong

ManpowerGroup is gaining momentum on the back of its global footprint and extensive portfolio of innovative workforce solutions. Also, the company’s businesses spread across Europe and APME countries are growing strong. Notably, in first-quarter 2018, revenues from Southern Europe increased 28.2% year over year to $2,312 million. The upside was driven by growth in permanent recruitment and strong businesses across France and Italy.

Revenues from Northern Europe totaled $1417.6 million, up 14.4% year over year. The increase was driven by strong growth in Poland, Finland and Russia. The APME segment’s revenues rose 13.9% year over year to $720.2 million. The uptrend was backed by growth in India, China and other APME countries like Taiwan, Malaysia and Singapore.

Competition Rife

ManpowerGroup operates in a highly competitive employment services industry with low barriers to entry. It faces stiff competition in both domestic and international markets from other established players such as Adecco (SIX:ADEN) S.A., Randstad Holding N.V. and Kelly Services Inc. This has forced ManpowerGroup to reduce its prices for retaining its existing clients and attracting new ones, which weighs on the company’s bottom line.

Zacks Rank & Stocks to Consider

ManpowerGroup currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks in the broader Business Services sector are Automatic Data Processing (NASDAQ:ADP) , Accenture plc (NYSE:ACN) and Broadridge Financial Solutions Inc. (NYSE:BR) , each carrying a Zacks Rank #2 (Buy).

The long-term expected earnings per share growth rate for Automatic Data Processing, Accenture and Broadridge is 11%, 10% and 10%, respectively.

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