Leading staffing firm Robert Half International Inc. (RHI - Analyst Report) reported third quarter 2013 earnings of 48 cents, ahead of the prior-year quarter adjusted earnings of 41 cents per share by 17.1%. Earnings were in-line with the Zacks Consensus Estimate.
Despite sluggish performance in the international markets, Robert Half witnessed strong earnings growth driven by solid demand for skilled professionals in the U.S., particularly in permanent placement, technology staffing and in Protiviti operations. In fact, the company’s earnings have now grown more than 15% year over year for 14 straight quarters, driven by growing demand for skilled workforce and consulting services.
We believe that the demand for the company’s services, in particular its staffing services, is highly dependent on the state of the economy and the staffing needs of its clients. A gradual improvement in economic conditions and the U.S. job market has led to a rise in the demand for the company’s specialized staffing and consulting services.
Quarter in Detail
Robert Half's total revenue was in-line with the Zacks Consensus Estimate and increased 4.9% year over year to $1.08 billion in the third quarter. Global staffing revenues grew 2.5% in the quarter. On a constant currency basis, global staffing revenues increased 1.3% year over year, with a 4% increase in the U.S. and a 6% decline in international staffing revenues in the third quarter.
Gross profit was $437.5 million in the reported quarter, up 5.4% year over year. Gross margin expanded 50 basis points to 40.7% in the third quarter as against 40.2% in the prior-year quarter owing to higher sales. Operating income increased 10.3% to $103.9 million in the quarter. Operating margin increased 60 basis points to 9.7% in the third quarter of 2013 on the back of higher gross margins and solid Protiviti results.
Revenues at Accountemps declined 0.8%, while revenues at Robert Half Management Resources decreased 0.2%. Revenues increased 2.5% and 7.9% at Office Team and at Robert Half Finance and Accounting, respectively. Revenues grew 11.8% at Robert Half Technology, and 16.3% at the Protiviti division from the prior-year quarter.
Robert Half had cash and cash equivalents of $279.7 million at the end of the third quarter versus $246.9 million at the end of second quarter 2013. Capital expenditure was $11.8 million in the third quarter as against $11 million in the prior quarter.
Robert Half paid its stockholders a cash dividend of 16 cents per share on Sep 16, amounting to a total of $22 million. The company also repurchased 0.8 million shares for a total of $28 million during the quarter. There are approximately 8.6 million shares remaining under the board approved stock repurchase plan.
Robert Half carries a Zacks Rank #1 (Strong Buy). Other stocks in the business services sector, worth considering include On Assignment Inc (ASGN - Snapshot Report), Manpower, Inc. (MAN - Analyst Report) and Korn/Ferry International (KFY - Snapshot Report), all of them holding a Zacks Rank #1.