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Robert Half (RHI) Q1 Earnings, Revenues Beat Estimates

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Leading staffing firm Robert Half International Inc. (RHI - Free Report) reported better-than-expected first-quarter 2017 results, primarily due to robust performance at Protiviti, coupled with staffing operations internationally. Its shares were up 1.6% after the market closed on Apr 20.

Also, the stock has underperformed the Zacks categorized Staffing Firms industry in the past year. While this Zacks Rank #3 (Hold) stock was up 3.2%, the industry gained 16.3%. We note that the company has been taking longer time in taking hiring decisions, which might be  the cause for its underperformance.

Robert Half’s first-quarter 2017 earnings of 62 cents per share outpaced the Zacks Consensus Estimate of 58 cents, and also exceeded its guided range of 55–61 cents. However, the same were down 3.1% from the prior-year quarter, due to soft sales and lower margins. 

Further, Robert Half's total revenue of $1.29 billion outdid the Zacks Consensus Estimate of $1.27 billion and was also within its guidance range of $1.250–$1.310 billion. But the revenues slipped 1.2% year over year, while on a constant currency basis, it declined 2%. This decline can be attributed to lower revenues witnessed at the staffing businesses.

The company recorded gross profit of $525 million in the quarter, which dipped 1.3% year over year. However, the gross margin was stable at 40.8%. Further, it reported operating income of $125.6 million, down 6.2% in the first quarter, with contraction of 50 basis points in the operating margin.

Segment Details

Based on the nature of services, the company has three reportable operating segments namely, Temporary and Consultant Staffing, Permanent Placement Staffing and Risk Consulting and Internal Audit Services.

Revenues from Temporary and Consultant Staffing and Permanent Placement Staffing come under the global staffing division, while Risk Consulting and Internal Audit Services are reported under the Protiviti division.

Global Staffing Division: Global Staffing revenues declined 2.2% year over year. While international revenues increased 8%, U.S. revenues fell 4.6% from the prior-year quarter. Currency also had a positive impact of 0.5% during the quarter. On a constant currency basis, global staffing declined 2.8%.

Protiviti: Protiviti revenues increased 4.8%, driven by 4.8% growth in U.S. revenues and 4.5% improvement in international revenues. Currency had a positive impact of 0.6% during the quarter. On a constant currency basis, Protiviti revenues rose 4.2%.

Financial Update

As of Mar 31, 2017, Robert Half had cash and cash equivalents of $260.1 million compared with $214.1 million in the prior-year period. Additionally, cash flow from operations was $124 million and capital expenditures were $10 million in the reported quarter.

In the first quarter, Robert Half bought back 1.1 million shares for $54 million. There are approximately 5.2 million shares available for buyback under the stock repurchase program.

Also, it paid a quarterly cash dividend of 24 cents per share for a total cash outlay of $31 million. Notably, management hiked its quarterly dividend from 22 cents per share to 24 cents in Feb 2017.

Q2 Guidance

Moving ahead, Robert Half remains confident of performing well given the solid labor market and stable economic landscape. Also, it expects reduction in the hiring cycle and in turn boosting the company’s profitability. Further, Protiviti witnessed another robust quarter and is enhancing its practice areas owing to digital expansion and data security measures.

Robert Half issued its earnings and sales guidance for the second quarter of 2017. The company expects revenues in the range of $1.275–$1.335 billion for the said quarter. In addition, it projects earnings in the range of 61–67 cents per share. The Zacks Consensus Estimate for the first quarter is pegged higher at 70 cents.

Stocks to Consider

Better-ranked stocks in the same industry include Heidrick & Struggles International, Inc. (HSII - Free Report) , ManpowerGroup Inc. (MAN - Free Report) and TrueBlue, Inc. (TBI - Free Report) .

Heidrick & Struggles, with a long-term earnings growth rate of 11.5% has surged 30.3% in the past six months. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

ManpowerGroup carries a Zacks Rank #2 (Buy) and boasts a long-term earnings growth rate of 13%. Further, its shares increased 29.2% over the past six months.

TrueBlue, a Zacks Rank #2 stock has surged 49% in the past six months.

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