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Rising Employment Trends Index Will Benefit Staffing Companies

August 22, 2014 | About:

mitu77

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The Employment Trends Index (ETI) witnessed an upward trend in July. The index now stands at 120.31, up from 119.92 in June. This represents a 6.6 percent gain in the ETI compared to a year ago. The six-month growth rate in the Employment Trends Index is the strongest in over two years, suggesting solid job growth is likely to continue in the coming months. The pickup in economic activity in recent months will likely increase the need and willingness of employers to accelerate hiring.

This is like a blessing in disguise for various staffing companies which is all set for growth. Robert Half International Inc. (RHI), is one such company that sees a brighter future. Robert Half, the world's first and biggest specific staffing firm, is a perceived pioneer in expert counseling and staffing services and is the guardian organization of Protiviti®, a worldwide counseling firm that helps organizations take care of issues in fund, innovation, operations, influence, risk and interior audit. Robert Half has staffing and consulting operations in more than 400 locations worldwide.

The company recently released the second quarter financial reports and as expected was firing all guns. For the quarter ended June 30, 2014, revenue grew to $1.16 billion as against $1.06 billion for the same period last year. Net income also increased to $75.1 million, or $.55 per share as against $63.1 million, or $.46 per share year ago quarter.

Robert Half's growth in the second quarter was wide based and the result of enhanced work markets and higher worldwide interest for expert staffing administrations. Year-over-year income growth rates quickened pleasantly amid the quarter, both in the United States and in our worldwide operations. The organization's Protiviti subsidiary likewise kept on posting extremely solid working results.

The most elevated successive and year-over-year revenue growth rates were accounted for by their changeless arrangement operations and Protiviti. This was Robert Half's seventeenth continuous quarter of twofold digit net income and earnings-per-share growth on year-over-year premise. Return on equity, on an unlevered basis, was 31 percent for the quarter.

Robert Half generates around 75% of its revenue from U.S. operations. The share price and revenue growth of Robert Half are highly correlated to U.S. temporary help services payroll.

Strategic Alliances provided tailwinds

Last year, Robert Half signed a strategic alliance with BlackLine Systems, a leading financial software provider. With this alliance, Robert Half now provides professional expertise to implement BlackLine Financial Close software suite. Protiviti, a subsidiary of Robert Half, has a partnership with BlackLine since 2010, and this alliance assisted further develop their relationship.

Protiviti provides business solutions in areas of finance, technology, governance and internal audit. This will speed its client's accounting process and will bring more business volume for Protiviti. In addition, Protiviti's performance has shown massive improvement in revenue as it records $151 million gain of 14% year-over-year.

Share repurchase

In the second quarter the company spent $21 million on its share repurchase programs as it repurchased 500,000 Robert Half shares. The investors also received quarterly cash dividend of $0, at a cost of $24 million on June 16, 2014.

Outlook

Different business reports and studies transmitted demonstrate that numerous organizations foresee accumulating IT staff in the second half of the year, and the number wanting to put a hang on procuring is declining. 14% of U.S. chief information officers plan to stretch their hiring in the last half of 2014. An alternate 76 % hope to contract just for open IT roles, contrasted with 67 percent in the initial six months of the year. 8% of engineering executives plan to put their procuring on hold through whatever is left of the year, down from 15% percent in the past overview, while just 1% hope to lessen their IT staffing levels.

Considering the growth in the staffing market scenario, the company is confident to continue its growth. For the third quarter the company anticipates revenues to be in the range of $1.175 billion to $1.225 billion and income per share in the range of $0.55 to $0.60.

Conclusion

With the staffing market bound to grow as the result of the upwards ETI trend, Robert Half is certain to witness growth in the future, this growth will leverage the share prices. I would suggest a buy to an Investor.


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