ManpowerGroup Inc Suffers From Systemic Woes
ManpowerGroup Inc’s (NYSE: MAN) Q3 earnings report gives evidence of just how finicky the market is. The company reported a great quarter but gave mixed results in regards to the analyst consensus and shares are down more than 7% because of it. Perhaps the most shocking part of the report, however, is that the systemic supply chain issues plaguing the globe are impacting this company's business. As isolated as it is from raw material shortages, container shipping, and supply chain disruptions those impacts are dragging on its business and that is some serious news. Regardless, the company's results were strong and fueled wider margins and exponential growth in earnings that makes ManpowerGroup a powerful dividend payer for your income portfolio.
ManpowerGroup Blames Delta Covid For Sluggish Results
ManpowerGroup had a good fiscal third quarter but one that was marred by two glaring factors. The first is that the $5.14 billion in consolidated revenue missed the consensus estimate by 300 basis points. The second is that, while YoY growth reached 11.7%, revenue is still down versus the pre-pandemic levels. On a segment basis, the company reports double-digit growth in both the Experis and Talent segments driven by high demand in all end markets. Coincidentally, commentary within the report gives evidence as to why hiring has been sluggish with so many Americans still unemployed and that is a lack of skilled labor within the labor pool.
Jonas Prising, ManpowerGroup Chairman & CEO, said, "Our third-quarter results reflect a continued global economic recovery, tempered by supply chain constraints and the ongoing impact of the Delta variant in various key markets. Global demand remained strong as our clients continue to look for skilled talent in a tight labor market and leverage our capabilities and workforce solutions expertise that help them achieve their desired business outcomes.
Moving down the report, the news is only good. The company experienced significant margin expansion versus last year driven by internal efforts to control costs, revenue strength, and mix within the business. At the gross level, gross margin widened by 80 basis points to 16.6% to drive a 16.8% increase in earnings. On the bottom line, operating profit increased more than 150% to 2.9% of revenue and drove earnings above expectations. The company's GAAP earnings of $1.77 missed the consensus by $0.12 but include restructuring costs and charges related to the acquisition of ettain group. The adjusted earnings beat the consensus by $0.04 and led the company to improve the guidance.
ManpowerGroup improved its guidance but there is a dark cloud hovering over it. The company upped its earnings estimate to a range of $1.99 to $2.07 including the impact of a full quarter of ettain group. This includes a -$0.04 per share impact from negative FX headwinds and -$0.13 in acquisition-related costs and compares to the consensus of $2.02. This leaves the updated Q4 guidance slightly below consensus at the low end and uninspiring for the market.
The Technical Outlook: ManpowerGroup Falls To Support
Shares of ManpowerGroup fell more than 7% in premarket action following the release of earnings. This move is driven by the sluggish revenue and earnings outlook but is opening a buying opportunity for investors. Price action is still trading above a key support level that may hold given the fact the stock trades at a deep discount to the broad market and yields an attractive 2.25%. If, however, ManpowerGroup falls and closes below the $105 level the value and yield could become even more attractive. In that scenario, the stock could fall down to the $100 or the $95 level before finding firm support. The Pricetargets.com consensus is closer to $118 which suggests to us this stock will be rebounding and moving higher regardless of where it finds support.
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