Manpower Inc. (MAN), the global leader in the employment services industry, posted better-than-expected third-quarter 2010 results that topped the Zacks Consensus Estimate on the heels of revenue growth across all geographies due to improvement in the job market for temporary workers.
Manpower indicated that U.S., Germany and U.K. witnessed healthy revenue growth during the quarter. Despite the recent economic downturn and unemployment rate hovering around approximately 10%, the company’s U.S. operations have registered revenue growth.
Quarterly Discussion
The quarterly earnings of 62 cents a share outpaced the Zacks Consensus Estimate of 47 cents and rose substantially from 23 cents earned in the prior-year quarter. The foreign currency fluctuation negatively impacted net earnings by 3 cents a share. The quarterly earnings exclude one-time items.
The net earnings for the quarter under review also surpassed management’s guidance range of 41 cents to 51 cents a share.
Milwaukee, Wisconsinbased company, Manpower, said that total revenues for the quarter soared 18.7% year-over-year to $4,972 million, and 24.1% in constant currency. Quarterly revenues also came well ahead of the Zacks Consensus Revenue Estimate of $4,818 million.
We observe that although cost of services climbed 18.5% to $4,130.8 million, gross profit rose 19.5% to $841.2 million, driven by top-line growth. Gross margin expanded 10 basis points year-over-year but contracted 50 basis points sequentially to 16.9%.
Operating profit for the quarter came in at $108.9 million compared with a loss of $21.5 million posted in the prior-year quarter.
Segment Details
By geographic segments, revenues from services in the Americas surged 63.7% to $1,069.2 million; and 62% in constant currency. On an organic basis, the Americas revenues climbed 31% in constant currency. Segment operating profit came in at $35.6 million compared with $7.2 million delivered in the prior-year quarter.
In France, revenues grew 7.4% to $1,411.6 million and 18.8% in constant currency, whereas segment operating profit soared 135.6% to $25 million and 160.6% in constant currency.
In EMEA (Europe, Middle East and Africa excluding France), revenues rose 12.1% to $1,805.1 million and 20.1% in constant currency. Segment operating profit surged 121.5% to $54.4 million and 139.3% in constant currency.
In Asia Pacific, revenues jumped 29.8% to $555.7 million and 20.5% in constant currency. Segment operating profit rose to $13.1 million from $4 million posted in the previous-year quarter.
Right Managementand Jefferson Wells brands continue to struggle. Revenues from Right Management services plunged 37% to $85.5 million, whereas revenues from Jefferson Wells services tumbled 6.9% to $44.9 million.
Jefferson Wells registered an operating loss of $1.5 million in the quarter under review, versus a loss of $0.6 million in the prior-year quarter.
Fourth-Quarter 2010 Guidance
Riding on the back of robust results, Manpower now expects fourth-quarter 2010 earnings in the range of 54 cents to 62 cents a share, including a foreign currency headwind of 2 cents but excluding reorganization costs of 15 cents to 20 cents related to Right Management and Jefferson Wells.
The current Zacks Consensus Estimate of 57 cents a share dovetails with the company’s guidance range.
Financial Aspects
Manpower ended third-quarter 2010 with cash and cash equivalents of $598.3 million, long-term debt of $681.8 million, reflecting debt-to-capitalization ratio of 19.8%, and shareholders equity of $2,765.6 million.
Capital expenditures for the first-nine months of fiscal 2010 were approximately $41.8 million. The company deployed $34.8 million for share repurchase and $30.6 million for dividend payment.
With a well-established network of nearly 4,000 offices in 82 countries, Manpower currently offers its services to about 400,000 clients. We believe that the company is better-positioned compared to its competitors for the economic recovery. The stock is poised to surge once the economy rebounds and demand in the labor market improves.
Currently, we have a Neutral on the stock. Manpower holds a Zacks #3 Rank, which translates into a short-term ‘Hold’ recommendation, and correlates with our long-term view.
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