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ManpowerGroup (MAN) Q1 Earnings to Reflect Strong Hiring

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ManpowerGroup Inc. (MAN - Free Report) is scheduled to report first-quarter 2018 results on Apr 20, before the opening bell.

We expect ManpowerGroup to witness strong revenue growth on the back of improved recruitment solutions, improvements in the labor market with optimistic hiring outlookand a strong U.S. economy. Moreover, earnings are likely to be driven by lower tax rates and favorable foreign currency movements.

We observe that shares of ManpowerGroup have rallied 14.6% in the past year compared with the S&P 500’s and industry’s gain of 16.0% and 26.1%, respectively.

 

Here are the expectations in detail.

Constant Currency Growth & Improved Hiring to Drive Revenues

ManpowerGroup has five reporting segments, primarily on a geographic basis: Americas, Southern Europe, Northern Europe, APME (Asia Pacific Middle East) and Right Management. While we expect strong performance of Northern Europe, Southern Europe and APME segments in the to-be-reported quarter on a year-over-year basis, the company’s business from Americas and Right Management are likely to decline.

Southern Europe is likely to witness improved revenues driven by growth in permanent recruitment and strong businesses across France and Italy. The Zacks Consensus Estimate for this segment’s revenues is pegged at $2,272 million, reflecting a year-over-year increase of 25.9%. Revenues from this segment increased 25.5% year over year to $2,399 million in fourth-quarter 2017. With France, Italy and Other Southern Europe in its coverage, the segment contributes around 41-42% of total revenues.

Revenues from Northern Europe are expected to increase on the back of strong growth in both Poland and Russia. The Zacks Consensus Estimate for this segment’s revenues is pegged at $1,397 million, reflecting a year-over-year increase of 12.8%. In fourth-quarter 2017, the segment reported $1,418.1 million in revenues (up 9.7% year over year). The segment accounts for almost 25-26% of total revenues.

The APME segment is also likely to witness an uptrend in revenues backed by growth in greater China and other APME countries. The consensus estimate for the segment stands at $645 million, reflecting year-over-year growth of 2%. Revenues from this segment increased 10.4% year over year to $695.2 million in fourth-quarter 2017. It contributes 12% of total revenues.

Revenues generated from Americas are expected to decrease year over year due to lower revenues from its Experis business. The Zacks Consensus Estimate for this segment’s revenues is pegged at $1,005 million, reflecting a year-over-year decline of 2%. In fourth-quarter 2017, segment revenues amounted to $1,071.8 million, up 0.8% year over year. The segment accounts for almost 19-20% of total revenues.

Revenues from the Right Management business are anticipated to decline to $51 million in first-quarter 2018 due to the persistent declines in career placement activities. Revenues had declined 8.9% year over year infourth-quarter 2017. The segment accounts for hardly 1% of total revenues.

Strength across Northern Europe, Southern Europe and APME segments will contribute significantly toward year-over-year growth of ManpowerGroup’s total revenues, the Zacks Consensus Estimate for which is currently pegged at $5,377 million, representing year-over-year increase of 13%. In fourth-quarter 2017, revenue rose 13.7% from the year-ago quarter to $5,637.5 million.

ManpowerGroup Revenue (TTM)

 

ManpowerGroup Revenue (TTM) | ManpowerGroup Quote

ManpowerGroup looks well poised on the back of skilled professionals, technological advancements, brand value and strong global network. Additionally, Trump administration’s business-friendly approach, a strong U.S. economy, robust manufacturing activity and improvements in the labor market are currently major positives for the overall Business Services sector.

Fed has raised its forecast for 2018 GDP growth to 2.7% from 2.5% in December 2017, highlighting the strong fundamentals of the economy. Currently, unemployment rate is at a 17-year low of around 4.1%.  Also, the unemployment rate is projected to remain stable at 3.6% in 2019 and 2020, better than the central bank’s earlier projection of 3.9% and 4%, respectively. This indicates that the U.S. labor market will maintain nearly full employment levels in the 2018-2020 time frame.

Per ManpowerGroup Employment Outlook Survey released on Dec 12, 2017, employers in 41 countries (out of 43) showed positive hiring intentions for first-quarter 2018. With a survey of more than 11,500 U.S. employers, the seasonally adjusted Net Employment Outlook for the first quarter of 2018 was up 19%. This marks the 14th consecutive quarter with an outlook of more than 15% or higher.

Given the lower unemployment levels and U.S. employers on a hiring spree, staffing companies stand to gain the most.

Tax Cut & Favorable Currency to Boost Earnings

The Zacks Consensus Estimate for earnings per share (EPS) in the to-be-reported quarter is pegged at $1.65, reflecting year-over-year growth of 51.4%. We expect the company to witness bottom-line growth on the back of lower tax rates and favorable foreign currency movements.

Notably, the consensus estimate exceeded the midpoint of the previous guidance range by 1 cent. ManpowerGroup anticipates EPS for first-quarter 2018 to be in the range of $1.60-$1.68. The guidance includes a positive impact of 20 cents from the tax cut and 15 cents from foreign currency. The same factors had also positively impacted the company’s fourth-quarter 2017 results. In fourth-quarter 2017, earnings rose 17.8% from the year-ago quarter to $2.12 per share.

Our Model Suggests a Beat

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. The Sell-rated stocks (Zacks Rank #4 or 5) are best avoided, especially if they have a negative Earnings ESP. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

ManpowerGroup has an Earnings ESP of +1.94% and a Zacks Rank #3, a combination that increases the odds of an earnings beat.

Other Stocks to Consider

Here are some stocks from the broader Business Services sector that investors may also consider, as our model shows that these have the right combination of elements to beat on earnings in first-quarter 2018:

Mastercard Incorporated (MA - Free Report) has an Earnings ESP of +2.39% and a Zacks Rank #2. The company is slated to report quarterly numbers on May 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Brink’s Company (BCO - Free Report) has an Earnings ESP of +5.25% and a Zacks Rank #2. The company is slated to report quarterly results on Apr 25.

FLEETCOR Technologies, Inc. (FLT - Free Report) has an Earnings ESP of +0.37% and a Zacks Rank #2. The company is expected to report quarterly numbers on May 7.

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