Tags: staffing | firms | recover | rebounding

Staffing Firms Recover On Rebounding Demand

By    |   Monday, 16 January 2012 11:53 AM

Staffing services and human resources firms are looking forward to a brighter 2012, thanks to a rebounding labor market. As long as jobless rates improve and Europe avoids outright economic implosion, demand will continue to improve for temp staffing companies such as Robert Half International (RHI), ManpowerGroup (MAN) and Paychex (PAYX).

When unemployment rates rise and more people are out of work, there's less demand for payroll processing and other human resources services, not to mention less need for hiring services. Unemployment rates are trickling down, hitting 8.5 percent in December compared to over 9 percent earlier in 2011.

Even if full-scale hiring isn't roaring back, hiring is on the mend, even if on a temporary basis, which actually does well when businesses are reluctant to hire full time.

Take Robert Half International. For the third quarter ended Sept. 30, 2011, net income was $44.2 million or 31 cents per share, on revenues of $984.7 million. Both figures were up from the prior year’s third-quarter, when net income came to $20.6 million or 14 cents per share, on revenues of $817.3 million.

"We saw broad-based demand for our professional services throughout the third quarter, resulting in double digit year-over-year revenue growth rates for the fifth consecutive quarter," says Harold M. Messmer, Jr., Chairman and CEO of Robert Half International.

Paychex, meanwhile, is seeing gains along similar business lines. For the three months ending Nov. 30, the company's second quarter, total revenue came to $545.7 million, a 7 percent increase from the $512 million reported for the same period last year. Net income and diluted earnings per share increased 5 percent to $140.4 million and 39 cents per share, respectively.

Payroll service revenue increased 5 percent to $371.7 million, while human resource services revenue increased 12 percent to $163.3 million.
Paychex caters to small and medium-sized businesses, which often don't bounce back as quickly from recessions as do big companies.

The company's checks-per-client ratio, which takes the number of paychecks clients issued during a quarter divided by its average customer base, slowed to 1.5 percent this past quarter from 2 percent growth in the previous quarter.

"This moderation is expected to continue through the remainder of the fiscal year. We have reiterated our guidance for the fiscal year as we continue to see a slow recovery in the economy with respect to sales from new business formations," company president and CEO Martin Mucci says in a statement.

Manpower, meanwhile, reports third-quarter net earnings of $79.6 million compared to $51.3 million a year earlier. Revenues for the third quarter hit $5.8 billion, an increase of 16 percent from the year-earlier period.
Despite the weak economy, hiring does go on. "We experienced solid growth throughout all geographies," ManpowerGroup Chairman and CEO Jeffrey A. Joerres says in a statement.

Temps welcome

Ratings agencies agree that, even though the labor market remains weak, companies will need services and will be more likely to hire on a temporary basis to save on costs.

Moody's, for instance, notched up its outlook on Manpower to positive in August of 2011. "In our central scenario of sluggish recovery, we expect moderate revenue and profitability growth for Manpower driven by steady demand for temporary labor," says Moody's Senior Vice President Lenny Ajzenman. "The staffing industry could benefit from an uncertain economic environment as many employers will remain reluctant to hire permanent labor."

In January of 2012, Barclays Capital reiterated ManpowerGroup at overweight, while in October of last year Avondale upgraded ManpowerGroup to market outperform from market perform.

In December, RBC Capital Markets reiterated Paychex at sector perform, while Barclays Capital in September reiterated an equal weight recommendation on the company.

Robert Half International, meanwhile, saw Barclays Capital reiterate an overweight recommendation on the stock in October, while in July of last year Robert Baird upgraded the stock to outperform from neutral.

Robert Half International will be releasing fourth quarter earnings on Jan. 25. Manpower will be releasing fourth quarter earnings on Feb. 1.

Paychex will be releasing third quarter earnings on March 28.

© 2021 Newsmax Finance. All rights reserved.

1Like our page
Monday, 16 January 2012 11:53 AM
Newsmax Media, Inc.

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

America's News Page
© Newsmax Media, Inc.
All Rights Reserved