Morningstar | Manpower’s Soft Results Are in Line With Near-Term Expectations
No-moat-rated Manpower reported weaker fourth-quarter results in line with our expectations, and nothing in its results alters our long-term view of the firm. Despite weaker expectations for next year, we maintain our $113 fair value. We expected $5.4 billion of revenue for the quarter, right in line with actual results. Top line growth was actually down 4% year over year compared with last year’s fourth quarter. Operating margins also decreased 20 basis points. For the full year, the firm posted adjusted EPS of $8.56, which actually exceeded our expectations of $8.29.Manpower attributed the challenged results of the quarter to a sluggish economic environment in Europe. Among these challenges include new governments in Italy and Spain, as well as uncertainty around Brexit. Ultimately, this has had an adverse effect on the hiring environment since managers are more reticent to commit to hiring during heightened uncertainty. We think Manpower’s greater exposure to temporary workers makes this environment harder on the hiring firm (relative to Robert Half). In addition, the noncareer nature of temporary work, which weakens any loyalty to Manpower, makes it harder for Manpower to find available skilled labor. Manpower is in the unenviable position of having to compete with established corporations whose recruiters hire workers it would otherwise have available.
In response to challenges Manpower faced throughout 2018, the firm is taking cost mitigation actions and maintaining pricing, which we think are the right moves. Manpower is also regrettably facing an increasing tax rate given that its tax-exempt Competitiveness and Employment Tax Credit program is being discontinued. Finally, the firm is anticipating a full-year top-line decline between 3% and 5% in its most recent guidance. Unsurprisingly, Europe will continue to be the culprit for these weaker numbers.
ManpowerGroup provides a range of workforce solutions and services, which include recruitment and assessment, training and development, career management, outsourcing, and workforce consulting. The company's family of brands and offerings includes Manpower, Experis, Right Management, and ManpowerGroup Solutions. The company's portfolio of recruitment services includes permanent, temporary and contract recruitment of professionals, as well as administrative and industrial positions. All of these services are provided under its Manpower and Experis brands. The company provides services under its Experis brand, particularly in the areas of Information Technology, Engineering, and Finance.
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