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On Jul 31, we upgraded staffing & outsourcing company ManpowerGroup Inc. (MAN - Analyst Report) to Outperform based on its improved prospects. Manpower became a Zacks Rank #1 (Strong Buy) stock shortly after reporting impressive second-quarter results.

Why the Upgrade?

Earnings estimate revisions for Manpower have been portraying an uptrend following the company’s healthy second-quarter 2013 results. In the last 30 days, the Zacks Consensus Estimate jumped 14% for 2013, while it increased 10.7% for 2014.

ManpowerGroup posted adjusted quarterly earnings of $1.05 per share that substantially surpassed the Zacks Consensus Estimate and jumped 38% year over year.

It is encouraging to note that the company has surpassed the Zacks Consensus Estimate by an average of 23.1% in the trailing four quarters. We believe that the company’s strategic initiatives toward lowering costs and driving margins position it well to sustain its growth momentum in 2013.

Manpower is now contemplating on exiting lower margin business and venturing into high margin business. The ManpowerGroup Solutions, the company’s high margin business, sustained its growth momentum during the quarter.

Going forward, Manpower expects to generate higher gross margin from the Americas and Southern Europe, which in turn is expected to boost its overall gross margins. Moreover, we believe that the company’s restructuring initiatives are expected to result in higher savings and in turn higher profits.

With a well-established network in about 80 countries, Manpower currently offers its services to about 400,000 clients. We believe Manpower’s brand value, comprehensive range of services and a strong global network provides it a competitive advantage over its peers, Robert Half International Inc. (RHI - Analyst Report), Kelly Services, Inc. (KELYA - Snapshot Report) and Korn/Ferry International (KFY - Snapshot Report) and reinforces its dominant position in the market.

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