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Insperity (NSP) Benefits From Higher Worksite Employee Growth

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Shares of Insperity Inc. (NSP - Free Report) have gained 68.3% on a year-to-date basis against 5.3% decline recorded by the industry it belongs to.



The company recently reported mixed third-quarter 2018 results, wherein earnings surpassed the Zacks Consensus Estimate but revenues missed the same. Adjusted earnings per share of 96 cents beat the consensus mark by 14 cents and increased 68.4% year over year. Total revenues of $925.1 million lagged the consensus estimate by $15 million but increased 16.3% year over year.

Insperity has an impressive earnings surprise history, having outpaced estimates in each of the last four quarters. It delivered average four-quarter positive earnings surprise of 18.4%. Over the past 60 days, the Zacks Consensus Estimate for fourth-quarter earnings has been revised 8.3% upward.

What’s Driving Insperity?

Strong Staffing Market

The staffing industry is currently benefiting from a strong economy, leading to robust manufacturing and non-manufacturing activities, and higher corporate spending post the tax reform. The labor market has been witnessing record low unemployment levels and strong job additions since the beginning of the year.

This seems to be working in favor of Insperity, which witnessed its professional employer organization (PEO) solutions revenues from the United States to grow 16.3% year over year in third-quarter 2018. The company provides an array of human resources and business solutions through its PEO services, which includes Workforce Optimization and Workforce Synchronization solutions.

Worksite Employee Growth

Insperity’s top-line growth is directly proportional to the rise in average number of worksite employees paid per month. Notably, the company’s third-quarter 2018 revenues of $925.1 million (up 16.3% year over year) benefited from a 15.2% increase in average number of worksite employees paid per month and 0.9% increase in revenues per worksite employee per month. Average number of worksite employees paid per month was 215,051 and revenues per worksite employee per month were $1,434 in the third quarter.

Worksite employee growth is being driven by strength across sales, higher client retention and rise in net hiring of worksite employees by the company’s client base.

Driven by the higher worksite employee growth rate, Insperity has raised its earnings guidance for the full year. The company now projects adjusted earnings between $3.69 per share and $3.73 per share, indicating growth of 51-52%, above the previously guided $3.49-$3.53 per share.

Shareholder-Friendly Moves

We are also impressed by Insperity’s efforts to reward its shareholders. In the first nine months of 2018, Insperity repurchased almost 212,000 shares for $16.2 million and paid dividends totaling $25.2 million. In 2017, 2016 and 2015, the company paid dividends of $65.8 million (inclusive of a special cash dividend of $41.7 million paid in fourth-quarter 2017), $20.6 million and $21.2 million, respectively. Such moves indicate Insperity’s commitment to create value for shareholders and underline its confidence in business.

Zacks Rank & Other Stocks to Consider

Currently, Insperity sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

A few other top-ranked stocks in the broader Business Services sector are Paychex, Inc (PAYX - Free Report) , WEX Inc (WEX - Free Report) and Automatic Data Processing Inc. (ADP - Free Report) , each carrying a Zacks Rank #2. Long-term expected EPS (three to five years) growth rates for Paychex, WEX and Automatic Data Processing are 8.5%, 15% and 12.5%, respectively.

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