Robert Half Continues to Grow on Strong Staffing Demand

On Aug 31, 2015, we issued an updated research report on Robert Half International Inc RHI.

This global staffing firm reported better-than-expected earnings in the second quarter of 2015 on Jul 23 owing to consistently rising demand for staffing services. However, revenues marginally missed the consensus mark, possibly due to currency headwinds.

Robert Half has been witnessing strong year-over-year earnings growth driven by solid demand for services provided by skilled professionals as well as a growing labor market in the U.S. since the past many quarters. In fact, the company’s earnings have now grown in double digits for 21 consecutive quarters on a year-over-year basis.

In the second quarter, Robert Half's total revenue grew 9% year over year to $1.272 billion, driven by broad-based revenue gains and higher service demand in every line of business, particularly Protiviti and Robert Half Technology. On a constant currency basis, revenues grew 13%. The company’s gross and operating margins also improved in the quarter driven by higher revenues.

Robert Half’s revenues have grown year over year for the past four years, driven primarily by broad-based and increasing demand for its professional staffing services, especially Protiviti and Robert Half Technology. We note that the company has been investing heavily in technology staffing over the past few years. The company’s international operations have also improved in the recent quarters, particularly driven by higher demand for staffing and consulting services.

With an improving economic picture, the company expects to generate accelerated global revenues in the near term. Also, U.S. health care reform and consumer protection regulations are fueling demand for the company’s services.

Robert Half’s subsidiary Protiviti is also one of the key drivers of revenue and operating performance. It helps companies solve problems in finance, technology, operations, governance, risk and internal audit. The company expects the momentum to continue in the upcoming quarters with an improving economic picture.

Robert Half also expects to invest in software initiatives and technology infrastructure, both of which are important to the company’s future growth opportunities. Major software initiatives include upgrades to enterprise resource planning applications and the implementation of a global, cloud-based customer relationship management application. These investments are expected to continue throughout 2015.

However, rising health care costs per the new health reform have increased the costs of the company. Also, fluctuations in currency values have an adverse impact on the profitability of the company, as Robert Half derives a considerable portion of revenues from foreign countries.

Robert Half has a Zacks Rank #2 (Buy).

Investors interested in the staffing industry can also consider Kforce, Inc. KFRC, Cross Country Healthcare, Inc. CCRN and Manpower, Inc. MAN. While Kforce and Cross Country sport a Zacks Rank #1 (Strong Buy), Manpower holds a Zacks Rank #2.

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