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Why Is Robert Half (RHI) Down 0.2% Since Last Earnings Report?

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A month has gone by since the last earnings report for Robert Half (RHI - Free Report) . Shares have lost about 0.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Robert Half due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Robert Half Q3 Earnings In Line, Revenues Beat Estimates

Robert Half’s third-quarter 2019 earnings came in line with the Zacks Consensus Estimate while revenues beat the same.

Quarterly earnings of $1.01 per share were up 6.3% year over year. The reported figure met the midpoint of the company’s guided range of 98 cents to $1.04.

Revenues of $1.55 billion beat the consensus mark by 0.3% and increased 5.9% year over year on a reported basis and 5.4% on an adjusted basis. Revenues were within the company’s guided range of $1.525-$1.590 billion.

Robert Half witnessed solid revenue growth in its U.S. staffing and Protiviti operations in the quarter.

Segmental Performance

Global Staffing revenues of $1.25 billion increased 3.3% year over year on a reported basis and 3.4% on an adjusted basis. U.S. staffing revenues of $973 million increased 5.8% on a reported basis and 4.5% on an adjusted basis. Non-U.S. staffing revenues declined 4.6% on a reported basis and 0.3% on an adjusted basis to $280 million.

Currency movements had an unfavorable impact of 0.9% on staffing revenues.

The quarter had 64.1 billing days compared with 63.3 days in the year-ago quarter. At present, Robert Half operates 325 staffing locations worldwide, with 86 locations situated in 17 countries outside the United States.

Protiviti: Protiviti revenues were $299 million, which increased 18.3% year over year on a reported basis and 14.6% on an adjusted basis, with strength across the U.S. and non-U.S. regions. Protiviti revenues from the United States grew 17.5% on a reported basis and 16.2% on an adjusted basis. The same from international regions rose 21.2% on a reported basis and 9.3% on an adjusted basis.

Currency movement lowered revenue growth by 0.8% on a year-over-year basis. Currently, Protiviti, along with its independently-owned Member Firms, has a network of 86 locations in 27 countries.

Operating Results

Gross profit in third-quarter 2019 was $646.4 million, up 5.9% year over year. Gross margin of 41.6% was flat year over year. Operating income was $163.8 million, up 7.8% year over year. Operating margin rose to 10.5% from 10.3% in the year-ago quarter. Selling, general and administrative expenses increased 5.3% year over year to $483.5 million.

Balance Sheet

Robert Half ended the quarter with cash and cash equivalents of $312.7 million compared with $269.4 million at the end of the previous quarter. Cash flow from operations was $191 million and capital expenditures were $17 million in the quarter. In the quarter, Robert Half bought back around 1.5 million shares for $80 million. The company has 3.4 million shares available for repurchase under its existing repurchase plan as approved by the board of directors. It paid out $36 million in dividends.

Fourth-Quarter 2019 Guidance

Earnings are anticipated between 94 cents and $1 per share. Revenues are expected between $1.5 billion and $1.565 billion. The midpoints of these projections indicate year-over-year revenue decline of 1% and EPS decline of 4%.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month.

VGM Scores

At this time, Robert Half has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile 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.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Robert Half has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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