Manpower Shares Do Job For Investors

6/9/2014


  Recent Price
$82
  Dividend
$0.98
  Yield
1.2%
  P/E Ratio
18
  Shares (millions)
81
  Long-Term Debt as % of Capital
14%
  52-Week Price Range
$87.15 - $53.17

ManpowerGroup ($82; MAN) started up in 1948 after its founders, two lawyers, could not find a typist to help them meet a project deadline. The company expanded into Europe in 1956 and now operates in 80 countries, helping clients fill both temporary and permanent positions. Manpower recruits skilled labor and professionals for staffing needs in industrial, construction, or office settings. It also offers training and consulting services.

A highly cyclical company, Manpower has yet to eclipse its 2008 peaks for annual revenue and operating cash flow. Still, trends for both are improving, while returns on equity, assets, and investment have steadily improved. Five of the stock's six Quadrix category scores are at least 70, contributing to an Overall score of 96. Manpower is a Buy and a Long-Term Buy.

Business breakdown

The staffing industry appears to be in the early innings of a cyclical growth cycle. U.S flexible staffing trends — viewed as a leading indicator of full-time job growth — were favorable in April, exceeding seasonal averages. With Europe's recovery under way, albeit slowly, labor demand in a key market should continue to rise in the year ahead.

Manpower has its biggest presence in France (26% of sales for the 12 months ended March) and the U.S. (15%). Southern Europe generates 36% of sales, followed by Northern Europe (29%), North America (22%), and Asia Pacific/Middle East (12%). Manpower expects Europe to drive June-quarter results, with companywide sales projected to climb 4% to 6%, marking the fifth straight quarter of accelerating growth.

Operating profit margins have expanded in five straight quarters, a trend Manpower sees continuing in the June quarter. Management expects per-share profits to surge 20% to 28%. The consensus profit estimate, up 11% over the past 60 days, stands at $1.30 per share, above the midpoint of the company's target range. Manpower has earned a reputation for managing expectations, topping every consensus profit estimate since the December 2008 quarter.

Free cash flow jumped 111% to $331 million for the 12 months ended March. Management has used that cash to improve its balance sheet, with net cash now at $167 million ($2.05 per share), reversing its net-debt position of $168 million a year ago.

Conclusion

The temporary-employment market is highly fragmented. With barriers of entry low, new competition often sprouts when economies improve. Yet gusts of the economic recovery in both Europe and North America should whisk the stock higher.

At 18 times trailing earnings, shares trade 27% below their five-year average of 24. If the P/E rises to just 20 and Manpower meets the 2014 consensus profit estimate of $5.13 per share, the stock stands to advance 25% by early 2015. The company has raised its semiannual dividend at an annualized rate of 7% over the past four years and currently yields 1.2%.

An annual report for ManpowerGroup Inc. is available at 100 Manpower Place, Milwaukee, WI 53212; (414) 961-1000; www.manpowergroup.com.

MANPOWERGROUP
Quarter
Per-Share Earnings*
($)
Sales
Change
Quarterly
Price Range
($)
P/E Ratio
Range
Mar '14
0.86
vs.
0.63
3%
86.93
-
71.89
20 - 16
Dec '13
1.49
vs.
0.91
1%
87.15
-
71.89
23 - 19
Sep '13
1.26
vs.
0.79
0%
77.32
-
53.60
23 - 16
Jun '13
1.05
vs.
0.51
-3%
58.99
-
50.94
21 - 18
           
Year
(Dec.)
Sales
 ($Bil.)
Per-Share
Earnings*
($)
Per-Share
Dividend
($)
52-Week
Price Range
($)
P/E Ratio
Range
2013
20.25
4.44
0.92
87.15
-
43.05
20 - 10
2012
20.68
2.95
0.86
48.28
-
30.53
16 - 10
2011
22.01
3.25
0.80
69.67
-
31.81
21 - 10
2010
18.87
1.72
0.74
65.66
-
39.94
38 - 23
 
Quadrix Scores †
Overall
Momen-
tum
Value
Quality
Financial
Strength
Earnings
Estimates
Performance
96
94
77
73
40
95
70

   * Earnings exclude special items.
   † Quadrix® scores are percentile ranks, with 100 the best.


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