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Nicholas Kitonyi
Nicholas Kitonyi
Articles (319)  | Author's Website |

Shares of ManpowerGroup Fall Despite Earnings Beat

Revenue and earnings fell during the quarter

February 01, 2020 | About:

Shares of global staffing and outsourcing services company ManpowerGroup Inc. (NYSE:MAN) plunged nearly 6% on Friday morning following the announcement of its most recent quarterly results. This is a massive single-session movement in the company’s stock price based on historical volatility.

The stock was trading at about $91.60 per share at the time of writing on, down from $97.48 at 9:30 a.m. Eastern on Jan. 31. ManpowerGroup closed at $93.94 on Thursday ahead of Friday’s pre-market earnings release. The fall comes despite the company delivering earnings that beat analyst expectations.

Highlights from the recent quarter

ManpowerGroup posted significant declines in fourth-quarter revenue and earnings compared to the prior year. Earnings of $2.15 per share were down from $2.44 in fourth-quarter 2018. Analysts were expecting earnings of $2.04 per share. Revenue fell 4% from the year-ago quarter to $5.2 billion.

ManpowerGroup’s annual net income also declined to $7.72 per share from $8.56 in 2018, while revenue edged 5% lower to $20.9 billion. The company’s annual earnings were affected by changes in foreign exchange to the tune of 28 cents per share.

During the year, Manpower repurchased 2.4 million shares of common stock for a total of $203 million, which boosted the stock price performance.

ManpowerGroup has been growing earnings consistently over the last five years, but that streak could end following the 2019 results.

The company pays dividends at just 26.5% of earnings, which leaves enough room for dividend growth. Its current annual dividend rate of $2.18 per share equates to a decent yield of 2.38%.

In comparison, Robert Half International Inc. (NYSE:RHI), one of ManpowerGroup’s closest peers, trades at a dividend yield of 2.11% while Kforce Inc. (NASDAQ:KFRC) is paying shareholders dividends at a yield of 1.93%.

Should you buy Manpower?

Despite Friday’s plunge, Manpower still looks like an interesting option for short-term investors who target stock price rebounds. The company’s 12-month forward price-earnings ratio also looks relatively attractive at 11.99 compared to Robert Half’s 13.24 and Kforce’s 13.48.

However, when we factor in five-year expected earnings growth, Manpower becomes significantly expensive compared to its peers with a price-earnings to growth ratio of 8.46. On the other hand, Kforce’s PEG ratio stands at 0.53 and Robert Half’s is 2.48.

In regard to its industry outlook, Manpower published a report that found global talent shortages doubled over the last decade. In hindsight, this provides the company with a huge opportunity to grow its wholly-owned subsidiary, Right Management, which focuses on talent identification, training and nurturing.

However, the company will have to battle a growing list of staffing and outsourcing companies, as well as alternative hiring platforms, to take full advantage of the opportunity. Robert Half will be the primary rival globally, while Microsoft Corp.’s (NASDAQ:MSFT) LinkedIn will provide an interesting alternative.

Disclosure: No positions in the stocks mentioned.

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About the author:

Nicholas Kitonyi
Nicholas is the founder of CAGR Value. He is a financial analyst with extensive experience in investment research and stock market analysis. His analysis has been featured on several research sites.

Nicholas has solid knowledge of both U.S. and European markets. His investment style is focused on undervalued plays and growth stocks. Nicholas classifies himself as a swing trader and likes to trade GBP/USD, gold and FTSE 100, among other liquid instruments.

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