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Improving economic trends in Europe, along with effective cost management helped ManpowerGroup Inc. (MAN - Analyst Report) to come up with better-than-expected third-quarter 2013 results. The company’s adjusted quarterly earnings per share (EPS) came in at $1.26, handily beating the Zacks Consensus Estimate of $1.09 and rising 59.5% year over year.

However, including one-time items, EPS came in at $1.18, up 49.4% from the prior-year quarter. Notably, Manpower stated that its quarterly earnings were not affected by foreign currency fluctuations.

Revenues & Margins

Total revenue inched up 0.3% (but fell 0.3% in constant currency) year over year to $5,188.8 million, based on robust performances across all geographies, excepting for the Asia Pacific and the Middle East. Moreover, reported revenues came ahead of the Zacks Consensus Estimate of $5,114.0 million.

Gross profit dropped 0.3% to $853.6 million, due to marginal rise in cost of services, partly offset by higher revenues. Gross margin fell 10 basis points (bps) to 16.5%, due to sluggish performance of the permanent recruitment business in the quarter.

Manpower posted operating profit of $162.4 million, up 37.1% from the prior-year period. Excluding restructuring charges, operating profit rose 43% year over year, while operating margin rose 100 bps to 3.3%.

Selling and administrative expenses fell 6.3% (6.6% on constant currency) to $691.2 million.

Operating Groups

By geographic segments, revenues from the United States rose 0.1% to $761.8 million year over year. The segment’s adjusted operating profit increased 39.8% to $34.3 million.

In Other Americas, revenues decreased 1.6% (up 3.4% in constant currency) to $382.0 million, while the segment’s operating profit increased 4.9% (7.9% in constant currency) to $11.4 million.

In France, revenues rose 2.1% year over year (down 3.6% in constant currency) to $1,420.7 million, while the segment’s operating profit increased 60.7% (51.5% in constant currency) to $58.4 million.  

In Italy, revenues increased 9.3% year over year (3.3% in constant currency) to $269.7 million. The segment’s segment operating profit increased 14.4% (8.4% in constant currency) to $10.7 million.

In Other Southern Europe, revenues increased 20.4% (12.5% in constant currency) to $227.9 million from the year-ago quarter. The operating profit came in at $4.0 million, up 79.8% (67.2% in constant currency) year over year.

In Northern Europe, revenues rose 1.5% (fell 0.3% in constant currency) to $1,448.1 million, whereas operating profit increased 18.3% (16.8% in constant currency) to $50.3 million, both on a year-over-year basis.

In APME (Asia Pacific Middle East), revenues came in at $601.4 million, down 12.6% (down 1.2% in constant currency) year over year. The segment’s operating profit came in at $19.2 million, down 7.2% (up 4.9% in constant currency) from the prior-year quarter.

Revenues from Right Management decreased 3.6% (1.8% in constant currency) year over year to $77.2 million. The company posted operating income of $4.5 million, down 20.9% (13.0% in constant currency) from the year-ago quarter.

Other Financial Details

Manpower ended the quarter with cash and cash equivalents of $488.7 million, total debt of $516.5 million, reflecting a debt-to-capitalization ratio of 16.0%, and shareholders’ equity of $2,793.4 million. The company has amended its revolving credit facility agreement. It has reduced the borrowing limit to $600 million from $800 million and extended the tenure by two years (maturing on Oct 2018). Moreover, Manpower incurred a capital expenditure of $33.6 million during the nine months period ended Sep 30, 2013.  


Manpower now expects fourth-quarter 2013 earnings per share in the range of $1.18–$1.26. The Zacks Consensus Estimate for fourth quarter 2013 stands at $1.18. Management anticipates fourth-quarter total revenue to range from flat to negative 2%. Gross margin is expected to remain in the range of 16.5%–16.7%. Further, operating profit margin is anticipated to be 3.2% to 3.4%. Tax rate is expected to be in the range of 38% to 39%.

With a well-established network in about 80 countries, Manpower currently provides services to about 400,000 clients. We believe that Manpower’s brand value, comprehensive range of services and a strong global network provide it a competitive edge over peers like Robert Half International Inc. (RHI - Analyst Report), TrueBlue, Inc. (TBI - Snapshot Report) and Korn/Ferry International (KFY - Snapshot Report). Currently, Manpower carries a Zacks Rank #1 (Strong Buy).

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