ManpowerGroup Poised To Grow Despite Prevailing Headwinds

On May 29, we updated the research report on staffing industry player ManpowerGroup Inc. (NYSE:MAN) .

Founded in 1948 and headquartered in Milwaukee, WI, ManpowerGroup is the global leader in the employment services industry and has a well-established network of 2,900 offices in 80 countries. The company, formerly known as Manpower Inc., changed its name to ManpowerGroup in Mar 2011. It offers its services to approximately 400,000 clients, including small and medium sized enterprises across all industry sectors as well as the world's largest multinational corporations.

The company has outperformed the Zacks categorized Staffing Firms industry with an average gain of 2.7% in the last three months as against 2.4% decline for the latter. ManpowerGroup is continuously making significant investments to expand permanent recruitment solutions offerings. Management continues to believe that global recovery is on track but at a slow and uneven pace. As a result, it is focusing on internal drivers like disciplined pricing and tough control on productivity to ensure uninterrupted profitability.

The company believes that its European business would strengthen in the quarters ahead. It is poised to grow on the back of productive workforce and sound restructuring initiatives. ManpowerGroup remains a good bet for growth and yield-seeking investors. The company is likely to benefit from its cost recalibration and simplification plan.

However, it believes that the U.K.’s decision to exit the EU has added some ambiguity regarding the employment and economic condition of U.K. Nearly two-thirds of the company’s revenues comes from Europe and the U.K. In fact, the U.K contributes nearly 10% of the ManpowerGroup’s total revenue. We believe that the country’s decision to exit the EU will affect the “hiring sentiment” in the region, which in turn, would hamper the company’s revenues.

ManpowerGroup reported mixed first-quarter 2017 results. Quarterly adjusted earnings fell short of the Zacks Consensus Estimate by 1.8%, but revenues surpassed the same by 1.4%. Adjusted earnings came in at $1.09 per share, up 11.2% year over year. However, the bottom line missed the Zacks Consensus Estimate of $1.11. Notably, ManpowerGroup stated that a strong dollar (relative to other currencies) also weighed on the company’s quarterly earnings by 3 cents per share in the quarter. Management anticipates currency fluctuations to persistently hurt the top line and bottom line. Foreign currency headwinds are likely to hurt the bottom line by 8 cents in second-quarter 2017.

ManpowerGroup currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry include BG Staffing, Inc. (NYSE:BGSF) , Randstad Holding NV (OTC:RANJY) and DLH Holdings Corp. (NASDAQ:DLHC) . All three stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

BG Staffing is currently trading at a forward P/E of 15.2%.

Randstad has a long-term earnings growth expectation of 8% and is currently trading at a forward P/E of 12.7x.

DLH Holdings is currently trading at a forward P/E of 18.3x.

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