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Zacks Industry Outlook Highlights: ManpowerGroup, Korn Ferry and Insperity

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For Immediate Release

Chicago, IL – July 12, 2021 – Today, Zacks Equity Research discusses Staffing including ManpowerGroup Inc. (MAN - Free Report) , Korn Ferry (KFY - Free Report) and Insperity, Inc. (NSP - Free Report) .

Link: https://www.zacks.com/commentary/1759620/3-stocks-to-watch-out-for-from-the-promising-staffing-space

A remote working model is leading to cost savings for many staffing companies by bringing down their spending on real estate and reduction of business travel. Many staffing firms are also finding new opportunities with the digitization of workforce.

A solid transition has been noticed from a candidate-driven market to a job-oriented market, of late. These factors bode well for companies in the Zacks Staffing industry. Additionally, continued government response in the form of pandemic-relief packages and expanded unemployment benefits have been acting as other tailwinds.

With the gradual resumption of business activities, the global staffing industry is anticipated to increase by 12% to $445 billion in 2021, per a report by Staffing Industry Analysts. This marks a steady improvement from a downfall of 11% in 2020,

ManpowerGroup, Korn Ferry and Insperity are some stocks that are likely to gain from the abovementioned industry trends. However, job loss concerns amid market uncertainties persist.

Industry Description

The Zacks Staffing industry comprises companies, which offer a wide range of services related to human resources and workforce solutions. These include employment screening, recruitment (both for temporary staffing and long-term placements), retirement solutions, human capital management, payroll management, performance management, organizational planning, financial and expense management.

Some industry participants also provide staffing and risk consulting services, business solutions to improve business performance of small and medium-sized businesses, organizational consulting services worldwide and professional staffing services and solutions. Some staffing firms are also engaged in the provision of recruitment and office support services.

What's Shaping the Future of the Staffing Industry?

Healthy Demand Environment: The industry has been witnessing growth in revenues and income over the past few years, which has enabled most players to pay out stable dividends and repurchase shares. The industry also stands to benefit from the gradual resumption of business activities, which were postponed or restricted due to the coronavirus-induced strict lockdowns across the globe. This has led to additional hiring and wage increase.

Rising Dependency on Technologies: The industry has witnessed a shift in its operating model with an increase in the number of remote workers. The remote working model is leading to cost savings for many firms by bringing down their spending on real estate and reduction of business travel. Staffing companies are also finding new opportunities with the digitization of the workforce and demand for software-as-a-service solutions to meet new challenges in the current scenario.

Technology-based recruiting techniques like social media, mobile technology, artificial intelligence and Big Data are in demand. Video conferencing tools such as Google Meet, Zoom, Skype and Microsoft Teams are being used to communicate with clients, conduct interviews and meetings, manage staff virtually, remote training and remote surveillance.

Also, technologies like cloud and blockchain offer more storage and safety to HR data. These trends should keep demand for staffing services in good shape.

Transitions Within the Industry: A solid transition has been noticed from a candidate-driven market (where applicants would apply for or choose the roles based on their respective educational background and skills) to a job-oriented market (where applicants are required to adapt themselves with the available open positions).

Coronavirus-induced lockdowns have resulted in unproductive units in several industries, prompting companies (especially in the aviation, travel & tourism, hospitality, manufacturing, automotive, media and entertainment sectors) to reduce their temporary staff. However, there has been a spike in hiring for essential services like e-commerce, logistics (package/freight delivery, hyper-local delivery), healthcare and information technology.

Additionally, a number of temporary employees are being hired across retail, co-operative and agricultural operations, including the distribution of food, milk, groceries, vegetables, under different job roles ranging from delivery agents, supervisors, drivers, customer care. Other essential services involve workers engaged in manufacturing and distribution of PPEs, and employees in banks, ATMs, telecom and Internet services.

Zacks Industry Rank Indicates Encouraging Prospects

The Zacks Staffing industry, which is housed within the broader Zacks Business Services sector, currently carries a Zacks Industry Rank #71. This rank places it in the top 28% of more than 250 Zacks industries.

The group's Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates strong near-term growth prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.

The buy-side analysts covering the companies in this industry have been increasing their estimates. Over the past year, the industry's consensus earnings estimate for the current year has increased 42.6%.

Before we present a few stocks that investors can buy or retain given their growth prospects, let's take a look at the industry's recent stock market performance and current valuation.

Industry Outperforms Sector and S&P 500

The Zacks Staffing industry has outperformed the broader Zacks Business Services sector as well as the Zacks S&P 500 composite over the past year.

The industry has gained 81.3% over this period against a 10.2% decline of the broader sector. The Zacks S&P 500 composite has risen 39.9% in the said time frame.

Industry's Current Valuation

On the basis of EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation and amortization), which is commonly used for valuing staffing stocks because of their high debt levels, the industry is currently trading at 12.46X compared with the S&P 500's 17.88X and the sector's 19.28X.

Over the past five years, the industry has traded as high as 13.17X, as low as 3.38X and at the median of 7.63X.

3 Staffing Stocks to Keep a Close Eye On

Korn Ferry: This Zacks Rank #1 (Strong Buy) Californa-based company provides organizational consulting services worldwide. You can see the complete list of today's Zacks #1 Rank stocks here.

Korn Ferry continues to benefit from its business model, which is highly diversified in terms of geography, segment and industry. Revenue growth, operational efficiencies and reduction in expenses have been aiding the bottom line. The company's solid cash position allows it to pursue strategic acquisitions, invest in growth initiatives and return cash through regular quarterly dividend payment and share repurchases.

The Zacks Consensus Estimate for current-year EPS has improved 21.5% in the past 90 days. The stock has gained 41% over the past six months.

ManpowerGroup: This Zacks Rank #2 (Buy) Wisconsin-based company provides workforce solutions and services in the Americas, Southern Europe, Northern Europe, and the Asia Pacific Middle East region.

ManpowerGroup's top-line has been benefiting from acquisitions, strong pricing discipline and cost control. The company's Managed Service Provider (MSP) business is resilient to the coronavirus crisis and hence it has been witnessing growth as it assisted more clients in building customized workforce solutions during the economic depression.

Buyouts boost ManpowerGroup's diverse portfolio and support its top-line growth. The company has been consistently rewarding its shareholders through dividend payments and share buybacks. Notably, its board recently declared a semi-annual dividend of $1.26 per share. This marks a 7.7% increase from the previous semi-annual dividend of $1.17 per share.

The Zacks Consensus Estimate for current-year EPS has improved 15.1% in the past 90 days. The stock has gained 21% over the past six months.

Insperity: This Zacks Rank #3 (Hold) Texas-based company provides human resources (HR) and business solutions to improve business performance for small and medium-sized businesses.

Increase in average number of worksite employees paid per month has been aiding the company's top line. Strength across sales, client retention and growth in the client base have also acted as other tailwinds. The company recently announced a dividend hike of 12.5%, thereby raising its quarterly cash dividend to 45 cents per share from 40 cents.

Further, Insperity raised its guidance for 2021. Adjusted earnings are now expected in the band of $3.83-$4.40 per share compared with the prior guidance of $3.27-$4.20. The Zacks Consensus Estimate of $4.11 lies within the updated guidance. Adjusted EBITDA is now anticipated in the range of $250-$280 million compared with the prior guidance of $225-$275 million. Average WSEEs are expected in the range of 243,600-248,300 compared with the prior guidance of 238,900-248,300.

The Zacks Consensus Estimate for current-year EPS has improved 8.4% in the past 90 days. The stock has gained 8.7% over the past six months.

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