Manpower Balances Risk-Reward

We currently maintain our long-term Neutral rating on ManpowerGroup (MAN - Analyst Report), the global leader in the employment services industry. Moreover, the company also holds a Zacks #3 Rank, which translates into a short-term Hold rating and correlates with our long-term outlook.

Manpower’s comprehensive range of services makes it a truly global staffing firm. The company provides services for the entire employment and business cycle including permanent, temporary and contract recruitment, employee assessment and selection, training, outplacement, outsourcing and consulting.

The company’s brand value and strong global network provides it a competitive advantage and reinforces its dominance in the market. Manpower leverages a strong network of about 3,900 offices, spanning across 80 countries and serving approximately 400,000 clients. It benefits from growth prospects in under-penetrated staffing markets.

Earlier, Manpower had posted better-than-expected second-quarter 2011 results that topped the Zacks’ expectation on the heels of revenue growth across all regions. Better expense control also lent support to the bottom line. However, fall in demand for the counter-cyclical outplacement services continues to impact the results.

The quarterly earnings of 87 cents a share outpaced the Zacks Consensus Estimate of 79 cents and more than doubled from 40 cents in the prior-year quarter. The foreign currency fluctuation favorably impacted net earnings by 11 cents a share.

Net earnings for the quarter under review also surpassed management’s guidance range of 74 cents to 82 cents a share.

Milwaukee, Wisconsin-based Manpower, said that total revenue for the quarter soared 23.6% to $5,667.3 million from the prior-year quarter, and 12% in constant currency. The quarterly revenue also came well ahead of the Zacks Consensus Estimate of $5,491 million.

Manpower, which competes with Kelly Services Inc. (KELYA - Snapshot Report), now expects third-quarter 2011 earnings in the range of 90 cents to $1.00 per share, including a favorable impact of foreign currency translation of 10 cents. Management has projected a total revenue growth of 8% to 10% in constant currency for the quarter.

However, Manpower’s Right Management brand continues to struggle due to a drop in demand for the counter-cyclical outplacement services. Revenue from Right Management services plunged 19.9% in constant currency in the second quarter. Management expects the Right Management business to decline between 9% and 11% in the third quarter in constant currency.

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