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Why Should You Retain ManpowerGroup (MAN) in Your Portfolio?

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A prudent investment decision involves buying stocks that have solid prospects and selling those that carry risks. At times, it is rational to hold certain stocks that have enough potential but are weighed down by tough market conditions.

Here we focus on ManpowerGroup Inc. (MAN - Free Report) , which has an expected earnings per share growth rate of 25.9% for 2018 and a VGM Score of B. Moreover, earnings are expected to register 3.3% growth in 2019.

However, the company has underperformed its industry in the past year. The stock has declined 24.5% against the industry’s gain of 1.5%.

 

We believe strong global network, robust staffing and recruitment services and strategic buyouts should boost ManpowerGroup stock. The company is highly focused on growing into a global leader in workforce solutions.

Let’s discuss them in detail.

Staffing Services

ManpowerGroup is one of the leading global workforce solutions company offering a diversified range of staffing services, serving approximately 400,000 clients through a well-established network of 2,900 offices spread across 80 countries.

Further, ManpowerGroup generates a major portion of its revenues from its staffing and interim services – especially the Americas, Southern Europe, Northern Europe and APME segments. The company’s staffing and interim services recorded strong growth in first-quarter 2018, contributing almost 87% to total revenues. The company’s brand value and strong global network provide it a competitive advantage and reinforce its dominant position in the market.

Strong Global Presence

ManpowerGroup is well poised on the back of its global footprint and extensive portfolio of innovative workforce solutions. The company is gaining strength in its businesses spread across Europe and APME (Asia Pacific Middle East) countries.

Notably, in first quarter 2018, revenues from Southern Europe increased 28.2% year over year to $2,312 million. The improved revenues were driven by growth in permanent recruitment and strong businesses across France and Italy. Revenues from Northern Europe were $1417.6 million, up 14.4% year over year. The increase was driven by strong growth in Poland, Finland and Russia. APME segment revenues rose 13.9% year over year to $720.2 million. The uptrend in revenues was backed by growth in India, China and other APME countries like Taiwan, Malaysia and Singapore.

Collectively, these three segments account for almost 80% of the company’s total revenues.

Acquisitions

Acquisitions have also been one of the key growth catalysts for ManpowerGroup. The company has been continuously acquiring and investing in companies globally. These include LearnUp (a recruitment company acquired in 2017), CIBER, Inc. (a global information technology consulting, services and outsourcing company, acquired in 2016) and others acquired earlier. With the acquisition of different types of companies, ManpowerGroup continues to strengthen its diversified portfolio.

Additionally, acquisitions contributed 50 basis points to first-quarter 2018 revenues. Further, the company expects acquisitions to positively impact its top line by 40 basis points in second-quarter 2018. Revenues are expected to grow between 5% and 7% on a constant currency basis in second-quarter 2018.

Bottom Line

The aforementioned factors positively impacted ManpowerGroup’s performance in the last reported quarter. The company outperformed the Zacks Consensus Estimate in the trailing four quarters, delivering an average positive surprise of 4.2%. We believe the upbeat performance will continue in the quarters ahead, thus giving investors enough reasons to remain optimistic on the stock. Moreover, the Zacks Consensus Estimate for current quarter earnings is pegged at $2.30, indicating year-over-year growth of 26.4%.

Broadly, with the U.S. economy improving with recordlower unemployment level and strong hiring, staffing companies stand to gain the most.

Zacks Rank & Stocks to Consider

ManpowerGroup currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks in the broader Business Services sector include Robert Half International Inc. (RHI - Free Report) , Korn/Ferry International (KFY - Free Report) and Insperity, Inc. (NSP - Free Report) . While Insperity sports a Zacks Rank #1, Robert Half and Korn/Ferry carry a Zacks Rank #2 (Buy).

In the trailing four quarters, Robert Half, Korn/Ferry and Insperity delivered a positive earnings surprise of 2.4%, 8.1% and 20%, respectively.

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