It has been about a month since the last earnings report for ManpowerGroup (MAN). Shares have lost about 19.2% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Manpower due for a breakout? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
ManpowerGroup Beats on Q4 Earnings and Revenues
ManpowerGroup reported better-than-expected fourth-quarter 2019 results.
Quarterly adjusted earnings of $2.15 per share surpassed the Zacks Consensus Estimate by 5.4% but declined 11.9% year over year. Earnings came above the guided range of $2-$2.08 per share.
Revenues of $5.2 billion marginally beat the consensus mark but declined 3.6% year over year on a reported basis and 2% on a constant-currency basis. Challenging market environment in Europe continues to weigh on the company’s top line.
Segmental Revenues
Revenues from America totaled $1.06 billion, up 1.6% year over year on a reported basis and 3.2% on a constant-currency basis. In the United States, revenues came in at $626.8 million, down 0.9% both on reported and constant-currency basis. In the Other Americas subgroup, revenues of $434.1 million increased 5.4% on a reported basis and 9.5% on a constant-currency basis. Americas contributed 20% to total revenues.
Revenues from Southern Europe were up 1.4% on a reported basis and 3.9% on a constant-currency basis to $2.33 billion. Revenues from France came in at $1.36 billion, down 5.2% on a reported basis and 2.3% on a constant-currency basis. Revenues from Italy were $380 million, down 5.9% on a reported basis and 3% on a constant-currency basis. The Other Southern Europe subsegment generated revenues of $589.4 million, up 28.2% on a reported basis and 29.3% on a constant-currency basis. Southern Europe contributed 45% to total revenues.
Northern Europe revenues declined 8.7% on a reported basis and 6.4% on a constant-currency basis to $1.16 billion. The segment accounted for 22% of total revenues in the quarter.
APME revenues totaled $596.5 million, down 18.5% on a reported basis and 19.4% on a constant-currency basis. The segment contributed 12% to total revenues.
Revenues from the Right Management business were up 3.8% year over year on a reported basis and 4.6% on a constant-currency basis to $52 million.The segment contributed 1% to total revenues.
Operating Performance
Gross profit in the fourth quarter was $859.6 million, down 2.4% year over year on a reported basis and 0.5% on a constant-currency basis. Gross profit margin came in at 16.5%, up 20 basis points (bps) year over year.
Operating profit of $191.6 million decreased 12.1% year over year on a reported basis and 10% on a constant-currency basis. Operating profit margin came in at 3.7%, down 30 bps year over year.
Balance Sheet and Cash Flow
ManpowerGroup exited the fourth quarter with cash and cash equivalents balance of $1.03 billion compared with $807.1 million in the prior quarter. Long-term debt at the end of the quarter was $1.01 billion, compared with $983.2 million in the preceding quarter.
The company generated $319 million of cash from operating activities and Capex was $16.7 million in the quarter. ManpowerGroup repurchased $51 million of common stock and paid out dividends of $64.1 million in the quarter.
First-Quarter 2020 Outlook
The company expects revenues to be down 2% to flat on a constant-currency basis and anticipates EPS in the range of $1.33-$1.41. It anticipates income tax rate in the first quarter to be around 35.5%.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month.
VGM Scores
Currently, Manpower has a great Growth Score of A, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren’t focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. Notably, Manpower has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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