A month has gone by since the last earnings report for Robert Half (RHI - Free Report) . Shares have added about 2.3% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Robert Half due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Robert Half Tops Q3 Earnings & Revenues Estimates
Robert Half reported strong third-quarter 2018 results with earnings and revenues surpassing the Zacks Consensus Estimate.
Earnings per share (EPS) of 95 cents beat the Zacks Consensus Estimate by 4 cents and increased 39.7% year over year. The reported figure exceeded the company guided EPS range of 88-94 cents.
Total revenues of $1.46 billion outpaced the consensus mark by $5 million. The top line increased 10.7% year over year on a reported basis and 11.1% on an adjusted basis. Notably, revenues came in line with the midpoint of the $1.43-$1.49 billion guided range.
Quarterly results benefited from growth across the company’s staffing divisions and Protiviti operations. The company is seeing positive business sentiment across the company’s small and midsize client base, especially in the United States. Lack of a skilled workforce across the globe increased demand for skilled talent, primarily in professional-level segments.
Solid Segmental Performance
Based on the nature of services, Robert Half has three reportable operating segments namely, Temporary and Consultant Staffing, Permanent Placement Staffing and Risk Consulting and Internal Audit Services. While revenues from Temporary and Consultant Staffing and Permanent Placement Staffing come under the global staffing division, the same from Risk Consulting and Internal Audit Services are reported under the Protiviti division.
Global Staffing Division: Staffing revenues of $1.21 billion improved 8.7% year over year on a reported basis and 9.8% on an adjusted basis. U.S. staffing revenues of $920 million increased 7.7% on a reported basis and 7.4% on an adjusted basis. Non-U.S. staffing revenues increased 12.1% on a reported basis and 17.9% on an adjusted basis to $293 million.
Currency movements had an unfavorable impact of 0.8% on reported staffing revenue growth.
Third-quarter 2018 had 63.3 billing days compared with 63.1 days in third -quarter 2017. At present, Robert Half operates 324 staffing locations worldwide, with 85 locations situated in 17 countries outside the United States.
Protiviti: Protiviti revenues were $253 million, which improved 21.2% year over year on a reported basis and 17.5% on an adjusted basis, with strength across both the U.S. and non-U.S. regions. Protiviti revenues from the United States grew 17.3% on a reported basis and 17.1% on an adjusted basis to $200 million. The same from international regions surged 38.3% on a reported basis and 19.5% on an adjusted basis to $53 million.
Currency movement decreased segmental revenue growth by 0.6% on a year-over-year basis. Currently, Protiviti along with its independently-owned Member Firms has a network of 81 locations in 25 countries.
Gross profit in the third quarter came in at $610.46 million, up 11.7% year over year. Gross margin increased to 41.6% from 41.2% in the year-ago quarter.
Staffing gross margin expanded 110 basis points (bps) year over year to 44.5%. Protiviti gross margin declined to 28.1% from 29.6% in the year-ago quarter.
Operating income came in at $151.13 million, up 14.3% year over year. Operating margin was 10.3% compared with 10% in the year-ago quarter.
At the staffing division, operating income increased 17% year over year to $126 million. Operating margin was 10.4%. Protiviti reported operating income of $25 million, which grew 4% from the year-ago quarter. Protiviti recorded an operating margin of 10.1%.
Selling, general and administrative expenses increased 10.9% year over year to $459.33 million.
Robert Half ended the third quarter with cash and cash equivalents of $361.7 million compared with $308.7 million at the end of the previous quarter. Cash flow from operations was $185 million compared with $148 millionin the last quarter. Capital expenditures of $10 million rose $1 million from the previous quarter.
In the reported quarter, Robert Half bought back 1.1 million shares for $79 million. The company had 9.1 million shares available for repurchase under its repurchase plan as approved by the board of directors.
The company also paid a cash dividend of 28 cents per share in September, which sums up to a total payment of $34 million.
Robert Half expects fourth-quarter 2018 revenues in the range of $1.43-$1.49 billion. Earnings are anticipated in the band of 88-94 cents per share. The mid-point of these projections reflects year-over-year top- (on a same-day, as-adjusted basis, including Protiviti) and bottom-line growth of 9% and 40%, respectively.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 6.01% due to these changes.
At this time, Robert Half has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Robert Half has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.