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We reaffirm our Neutral recommendation on Robert Half International, Inc. (RHI - Analyst Report) despite a solid second quarter 2013 as we remain concerned about the continued weakness in international markets.

Why the Reiteration?

Robert Half’s earnings and revenues beat the Zacks Consensus Estimate in the second quarter. Earnings of 46 cents per share increased 21.1% from the prior-year quarter, driven by solid demand for skilled professionals in the U.S. with improving economy.

Especially the permanent placement, information technology staffing and in Protiviti operations of the company are benefiting from improving demand. Margins also improved on the back of lower operating expenses.

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 increased demand for the company's temporary and permanent staffing services and risk consulting and internal audit services.

However, Robert Half has significant international presence, with 25% of its revenues from its operations abroad. 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 soft revenues in the second quarter. Revenues increased only 3.4% year over year and 1% on a constant currency basis.

Further, we believe that currency headwinds and a tough job scenario, particularly in Europe, are denting the demand for recruitment services. In addition, cost savings and headcount reduction measures taken by other companies adversely affect placement firms like Robert Half.

Other Stocks to Consider

Robert Half holds a Zacks Rank #3 (Hold). Other stocks that are performing well and are worth considering in the business services sector include Manpower, Inc. (MAN - Analyst Report), Korn/Ferry International (KFY - Snapshot Report) and Trueblue Inc. (TBI - Snapshot Report), all with a Zacks Rank #1 (Strong Buy).

(We are reissuing this article to correct a mistake. The original article, issued Wednesday, Sept 11, 2013, should no longer be relied upon.)

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