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What's in Store for Robert Half (RHI) This Earnings Season?

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Robert Half International Inc. (RHI - Free Report) is slated to report fourth-quarter 2017 results on Jan 30, 2018, after the closing bell. Notably, the top- and bottom-line results of this leading staffing solutions provider have lagged the Zacks Consensus Estimate in three of the preceding four quarters.

Considering this, let’s delve into how things are shaping up for the upcoming announcement.

What to Expect?

The Zacks Consensus Estimate for earnings for the fourth quarter and 2017 has been stable over the past 30 days at 63 cents and $2.58, respectively. Projected earnings for the fourth quarter depict year-over-year growth of 3.2%, while the same for the year shows a decline of 3.4%, respectively.

However, management expects fourth-quarter earnings in the range of 29-39 cents per share after considering the impacts of the latest tax reforms. This includes one-time charges of approximately $34-38 million (amounting to nearly 27-31 cents per share) to its provision for income taxes.

Further, analysts polled by Zacks expect net sales of $1,312 million for the fourth quarter, up 3.7% from the year-ago quarter.

Robert Half International Inc. Price, Consensus and EPS Surprise

Factors at Play

International Revenues Expected to Rise

Robert Half’s international revenues have been surging, courtesy of rising demand for professional staffing services. This has been a persistent trend since the first quarter of 2014. Further, the company’s temporary staffing services have been on the rise globally, as employers are building flexible staffing options in human resources plans. The company has been investing heavily in tapping the evolving prospects in the technology staffing area, over the past few years.

Driven by such efforts, international revenue growth, mainly from the European regions provided some cushion to Robert Half’s otherwise soft figures in third-quarter 2017. During the quarter, currency-neutral staffing revenues from international regions jumped 11% from the prior-year quarter. Also, international revenues grew 12% year on year in the Protiviti segment.

Such trends are likely to continue favoring the company’s international revenues during the fourth quarter as well.

Trends in the United States Bode Well

Moving on, while Robert Half’s U.S. revenues were soft in the third quarter, management stated that trends improved in September 2017 and continued till October 2017. Evidently, temporary and consulting staffing revenues improved 2.1% in September and 2% in the first two weeks of October. Also, permanent placement revenues advanced 7.2% in September, while it surged 21% in the first three weeks of October.

Moreover, the latest tax reforms in the United States are expected to increase hiring activities. The benefits from lower tax rates may propel companies to allocate more capital for increasing headcount to support business growth. This can significantly bolster Robert Half’s business in the forthcoming periods.  

These factors along with an overall improved economic scenario in the United States, encourages management about growth in the forthcoming periods. Moreover, the company’s investments in digital technology are expected to enhance service offerings to clients and candidates both in the United States and internationally.  

Headwinds Likely to Weigh on Performance

Robert Half’s Protiviti segment has been witnessing declining operating margins since the beginning of the year 2016. This is due to lower gross margins and a lesser number of higher margin clients. Third-quarter gross margin for Protiviti declined 130 basis points to 29.6%, which dented the company's profits. Also, this segment witnessed revenue drop of about 4% to $209 million in the quarter.

All said, let’s wait and see if the aforementioned growth drivers can help Robert Half offset these headwinds in the quarter to be reported.

What Does the Zacks Model Unveil?

Our proven model does not conclusively show that Robert Half is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. You may uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Although Robert Half carries a Zacks Rank #2, its Earnings ESP of 0.00% makes surprise prediction difficult. You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks With Favorable Combinations

Here are some companies which, according to our model, have the right combination of elements to post earnings beat this quarter:

S&P Global Inc. (SPGI - Free Report) has an Earnings ESP of +4.21% and carries a Zacks Rank #2.

FleetCor Technologies Inc. (FLT - Free Report) has an Earnings ESP of +0.05% and carries a Zacks Rank #2.

ExlService Holdings Inc. (EXLS - Free Report) has an Earnings ESP of +0.34% and carries a Zacks Rank #2.

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