We reaffirm our Neutral recommendation on Robert Half International, Inc. (RHI - Analyst Report) and we have faith in the company’s long term fundamental despite sluggish results in the first quarter of 2013.
Why the Reiteration?
Robert Half’s earnings and revenues missed the Zacks Consensus Estimate in the first quarter. Revenues also remained flat year over year due to poor performance of the international segment. We note that Robert Half has significant international presence and more than half of its revenues come from its international operations.
A strong dollar is negatively impacting export sales. In addition, weak staffing demand outside the U.S., especially in Europe, due to an uncertain economic condition resulted in lower revenues in the quarter. On a constant currency basis, revenues increased 4% year over year.
Further, we believe that currency headwinds and a tough job scenario, particularly in Europe, are denting the demand for recruitment services, which keeps us on the sidelines. In addition, cost savings and headcount reduction measures taken by other companies adversely affect placement firms like Robert Half.
However, we prefer to remain Neutral as Robert Half has sound fundamentals. The company has been witnessing strong demand for specialized staffing and consulting services, particularly in the U.S.
Further, the improving global economic condition has heightened the demand for the company's temporary and permanent staffing services and risk consulting and internal audit services. Robert Half’s earnings increased in the first quarter due to the rising demand for skilled professionals in the U.S., particularly in permanent placement, information technology staffing and in Protiviti operations.
Other Stock to Consider
Other stocks that are performing well and are worth considering in the business services sector include Manpower, Inc. (MAN - Analyst Report), On Assignment Inc (ASGN - Snapshot Report) and AMN Healthcare Services (AHS - Snapshot Report), all with a Zacks Rank #2 (Buy).