The Q1 earnings season is just round the corner and investors are on the lookout to add stocks that have the potential to surpass earnings expectations in the quarter. This is because earnings beat positively impacts the stock price.
In fact, the projection regarding Q1 is very encouraging. Per the latest Earnings Preview report, total earnings for S&P 500 companies are expected to be up 16% on 7.4% higher revenues. The report further predicts that 11 of the 16 Zacks sectors will end the Q1 earnings season with the bottom line improving year over year.
One of those sectors is the Business Services sector, wherein the top and bottom line are expected to increase 4.8% and 10.5%, respectively. Notably, this highly diversified sector includes Staffing firms, Consulting Services, Business-Information Services, Government Services, and Auction and Valuation Services.
Given this backdrop, it is not a bad idea to indulge in a comparative analysis of two staffing stocks — ManpowerGroup Inc. (MAN - Free Report) and Robert Half International Inc. (RHI - Free Report) — ahead of their respective Q1 earnings reports. ManpowerGroup is slated to report on Apr 20, while Robert half is expected to unveil earnings a day earlier. At present, ManpowerGroup has a market capitalization of $7.33 billion, while that of Robert Half stands at $7.10 billion.
As both staffing firms are on the same footing, carrying a Zacks Rank #3 (Hold), we use certain other parameters to find out which company is better positioned ahead of the Q1 reporting cycle. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Considering price performance in a year’s time, Robert Half clearly scores over ManpowerGroup. Robert Half has gained 26.2%, outperforming the broader sector’s rally of 14.4%. The industry has grown 26.7% in the said time frame. ManpowerGroup has gained 12.9% in the same time frame, underperforming both the broader sector and the industry.
Earnings Estimate Revisions & Expected Growth
Based on current-quarter earnings estimate revisions in the last 60 days, ManpowerGroup and Robert Half are equally placed. Estimates for both ManpowerGroup and Robert Half have remained stagnant at $1.65 and 73 cents per share, respectively.
Pondering on year-over-year growth, we note that ManpowerGroup enjoys an edge over Robert Half. The current-quarter Zacks Consensus Estimate for ManpowerGroup’s earnings reflects year-over-year growth of 51.4%. The same for Robert Half portrays year-over-year growth of 17.8%.
The picture is quite similar for full-year 2018 also. Estimates for both ManpowerGroup and Robert Half remained unchanged at $8.96 and $3.23 per share, respectively, in the last 60 days, reflecting year-over-year growth of 27.3% and 24.2%.
Further, we expect first-quarter 2018 revenue growth of 13% for ManpowerGroup, which is significantly higher than 5.5% for Robert Half.
The picture is quite similar for full-year 2018. We project 9.5% revenue growth for ManpowerGroup, better than Robert Half’s rally of 5.9%.
Earnings Surprise History
In terms of earnings history, ManpowerGroup has performed impressively over Robert Half as the former has surpassed the Zacks Consensus Estimate in three of the previous four quarters, resulting in an average of 2.7%. Robert Half has delivered positive surprises in two of the prior four quarters with an average beat of 1.8%.
We have tried to evaluate ManpowerGroup and Robert Half in terms of three metrics. Let’s take a look at them.
The trailing 12-month price-to-earnings (P/E - TTM) multiples for ManpowerGroup and Robert Half are 16.0 and 22.4, respectively, while its industry’s is 19.9.
The trailing 12-month price-to-book (P/B) multiple for ManpowerGroup is 2.6, compared with 6.5 for Robert Half. The industry’s P/B is 3.1.
Finally, the trailing 12-month price-to-sales (P/S) multiples for ManpowerGroup and Robert Half are 0.4 and 1.4, respectively, compared with the industry’s 0.6.
Based on the above metrics, we find ManpowerGroup to be comparatively cheaper than Robert Half.
ROE and ROC
Return on Equity (ROE) is a measure of a company’s efficiency in utilizing shareholders’ funds. ROE for the trailing 12-months looks impressive for Robert Half in comparison to ManpowerGroup. The current ROE for Robert Half is 29.3% while that of ManpowerGroup is 17.9% compared with the industry’s ROE of 18.5%.
The picture is same in terms of Return on Capital (ROC) where Robert Half scores over ManpowerGroup. ROC for Robert Half and ManpowerGroup are 29.3% and 14.8%, respectively, while the industry’s is 15.8%.
ManpowerGroup’s dividend yield over the past year has been 1.65%, higher than the industry’s figure of 1.26%. With a dividend yield of 1.93%, Robert Half shareholders earn significantly higher dividend yield than ManpowerGroup as well as the industry.
Our comparative analysis shows that ManpowerGroup scores over Robert Half in terms of valuation, expected earnings and sales growth and earnings history. Robert Half enjoys an advantage in terms of price performance, dividend yield, return on capital and equity.
Both the companies are two of the nation’s leading employment service providers. They look strong on the back of their skilled professionals, technological advancements, brand value and strong global network.
Some better-ranked stocks from the same space include Insperity (NSP - Free Report) and Korn/Ferry Inc. (KFRC - Free Report) . While Insperity is a Zacks Rank #2 (Buy) stock, Korn/Ferry sports a Zacks Rank #1.
Earnings for Insperity and Korn/Ferry are estimated to rise 23.9 % and 12.9%, for the current quarter.
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