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ManpowerGroup (MAN) Tops Q1 Earnings & Revenue Estimates

Zacks Equity Research
Updated

ManpowerGroup Inc. MAN reported strong first-quarter 2018 results with revenues and earnings surpassing the Zacks Consensus Estimate.

Earnings of $1.72 per share beat the consensus mark by 7 cents and increased 57.8% year over year. Notably, the reported earnings exceeded the midpoint of the first-quarter guidance range by 8 cents.

The bottom line was driven by improvement in operating metrics and favorable foreign currency movements. These were, however, partially offset by expenses related to previous buyout and market value adjustments on available-for-sale investments under the new accounting system recently adopted by the company.

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 augur well for the company. It is highly focused on growing into a global leader in workforce solutions.

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We observe that shares of ManpowerGroup have declined 3.3% in the past year against the S&P 500 and industry’s gain of 12.8% and 16.6%, respectively.

 

Let’s check out the numbers.

Revenues

ManpowerGroup’s first-quarter 2018 revenues of $5,522.4 million beat the Zacks Consensus Estimate of $5,376.8 million. The figure was up 16.1% year over year and 5.4% on a constant currency basis. The year-over-year increase was backed by positive currency impact of 11% and acquisitions’ contribution of 50 basis points.

Additionally, strength across Northern Europe, Southern Europe and APME (Asia Pacific Middle East) segments also contributed significantly toward year-over-year growth of revenues. These were, however partially offset by the company’s declining business from Americas and Right Management segments.

Let’s check out the segmental performance in details.

Revenues by Segment

Revenues from Southern Europe increased 28.2% year over year to $2,312 million. The segment witnessed improved revenues driven by growth in permanent recruitment and strong businesses across France and Italy. It accounted for 41.9% of total revenues.

Revenues from Northern Europe were $1417.6 million, up 14.4% year over year. The increase was driven by strong growth in Poland, Finland and Russia. The segment contributes 25.7% to total revenues.

APME segment revenues rose 13.9% year over year to $720.2 million. The uptrend in revenues was backed by growth in India, China and other APME countries like Taiwan, Malaysia and Singapore. The segment contributes 13% of total revenues.

Revenues generated from America were $1,022.6 million, down 0.3% year over year. The year-over-year decline was due to lower revenues from its Experis and ManpowerGroup Solutions business. The segment accounted for 18.5% of total revenues in the reported quarter.

Revenues from the Right Management business declined 10.6% year over year to $50 million, due to reduced career placement activities. It accounts for 0.9% of total revenues.

Operating Results

Gross profit for the reported quarter was $885.4 million, up 12.4% year over year.

Operating profit of $153.8 million was up 20.2% year over year and 8.4% on a constant currency basis. Operating profit margin came in at 2.8%, up 10 basis points over the prior year. The increase in operating profit was due to significant top-line growth.

America segment operating profit increased to $42.9 million, up 10.9% from the prior-year quarter. Operating profit from Southern Europe, Northern Europe and APME increased to $97.7 million (up 19.9% y/y), $16.6 million (up 40.7% y/y) and $25.9 million (28.4% y/y), respectively. However, Right Management segment operating profit of $6.4 million was down 27% year over year.

Net income of $97 million for the reported quarter increased 30.4% year over year.

ManpowerGroup Price, Consensus and EPS Surprise

 

ManpowerGroup Price, Consensus and EPS Surprise | ManpowerGroup Quote

Balance Sheet and Cash Flow

ManpowerGroup exited first-quarter 2018 with cash and cash equivalents of $552.2 million compared with $724.4 million in the year-ago quarter. As of Mar 31, 2018, long-term debt was $491.1 million compared with $478.1 million at the end of 2017.

The company used $58.4 milllion of cash in operating activities in the reported quarter.

Second-Quarter 2018 Outlook

ManpowerGroup issued guidance for second-quarter 2018.

ManpowerGroup anticipates EPS for second-quarter 2018 (excluding restructuring costs) to be in the range of $2.33-$2.41, better than the Zacks Consensus Estimate of $2.26. The guidance includes a positive impact of 18 cents from foreign currency.

Revenues are expected to grow between 5% and 7%, on a constant currency basis. Acquisitions are expected to positively impact the top line by 40 basis points.

Further, the company expect its income tax rate in second-quarter 2018 to be around 28.5%.

Zacks Rank & Upcoming Releases

ManpowerGroup currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Investors interested in the  broader Business Services sector are keenly awaiting first-quarter earnings reports from key players like FTI Consulting FCN, S&P Global SPGI and Interpublic Group of Companies IPG. While FTI Consulting and S&P Global are slated to report quarterly numbers on Apr 26, Interpublic Group of Companies will release its results on Apr 27.

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