ManpowerGroup Beats And Raises
ManpowerGroup NYSE: MAN has more than lived up to our expectations. The company’s internal health coupled with reopening trends have it set up to exceed its pre-COVID revenue levels in the second half of the year. You might think that labor markets are shaky based on lingering high levels of unemployment but that would be a mistake. The labor market is robust despite that fact and appears to be gaining momentum globally. In our view, ManpowerGroup remains a value and an attractive buy for dividend growth investors.
ManpowerGroup, The Recovery Is Just Getting Started
ManpowerGroup reported a stellar second quarter and one in which we can find only one fault. The revenue of $5.27 billion is up 40.9% from last year, 31% adjusted for foreign exchange, and beat the consensus by 230 basis points but remains down by 2% in the 2-year comparison. That said, the comps are still good and are supported by strength in all brands, segments, and operating areas. The comps also led the company to raise guidance for the third quarter.
On a business segment basis, the company reports all brands achieved significant revenue growth as demand for Staffing, Recruitment, and Talent services were all high. On a geographic basis, southern Europe experienced the most robust growth at 51% but both the Americas and Europe in total grew double-digits while the Asia-Pacific Middle East segment grew by 5.5%.
Moving down, the company's margins improved significantly over the past year. The company has been working hard on its liquidity position and improved collections by 1.9 days outstanding. That, plus the revenue strength, drove GAAP EPS of $2.02 and reverses a loss of $1.11 last year. FX played a role in the revenue strength and added $0.13 to the net.
The company did not give guidance for revenue for the third quarter but did guide the GAAP EPS to a range above the consensus. The company is expecting earnings in a range of $1.86 to $1.94, not including an expected $0.04 impact from foreign exchange. Including foreign exchange, the company is expecting $1.90 to $1.98 versus the consensus of $1.73. Including the guidance, at the low end, the company is expected to have earned 80% of the full-year consensus by the end of the third quarter. Not only does this guidance put the company firmly on track to soundly smash through the full-year consensus EPS estimate but we also think that it is conservative and the company will exceed it.
ManpowerGroup Returns Capital To Shareholders
ManpowerGroup is a high-quality dividend growth stock as well as a share repurchaser. The company repurchased $50 million in shares over the quarter and is expected to continue buying shares as the opportunity arises. As for the dividend, the stock yields 2.26% at recent price levels and looks very safe. The company's payout ratio is only 40% of the consensus, execs are guiding earnings higher, and the balance sheet is a fortress so we fully expect to see the company make a 12th dividend increase at the end of this year. The CAGR is a little low at 8% but the increase is a high probability event.
The Technical Outlook: ManpowerGroup Pulled Back Into A Buy
ManpowerGroup fell hard along with the broad market the day before the earnings were released. In our view, that has turned into a fabulous buying opportunity in a lightly valued stock with a high yield. At this level, the stock is trading at only 18X its consensus estimates for this year and 14X next which offers a significant value. Assuming support holds at the $111 level we expect to see this stock rocket back up to retest the recent highs very soon.
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