In spite of earnings drop, Manpower stock is optimistic

Manpower Inc. stock price rose 4 percent Tuesday.

by Anjana Sundaram
February 02, 2010

Manpower Inc. stock rose 4 percent Tuesday as lower fourth-quarter earnings still beat downbeat analyst expectations.

The Milwaukee-based staffing company’s profit dropped by 62 percent to $29.1 million, or 37 cents per diluted share, in the quarter ended Dec. 31, compared with $76 million, or 97 cents per diluted share, in the year-earlier quarter. 

Wall Street’s consensus estimate was 24 cents per diluted share, according to Zacks Investment Research.

Manpower’s fourth quarter results included a $12.7 million pre-tax reorganization charge related to office closures and consolidations, as well as severance costs for laid-off workers. The charge reduced earnings by 5 cents per diluted share.

Revenues decreased by 4 percent, to $4.4 billion from $4.6 billion in the year-earlier quarter.

“Overall, the fourth quarter 2009 was still a difficult quarter for us. The trends, however, are encouraging as we move into 2010,” said CEO Jeffrey A. Joerres in a conference call.

Company officers announced they are in the process of acquiring Comsys IT Partners Inc., described as the third-largest technology staffing firm in the U.S. Manpower has agreed to offer $17.65 per share through a tender offer expected to start in March. The equity value of the deal is $378 million. Manpower is also assuming $53 million in debt.

“We are adding real scale and additional know-how to put us in the position of being one of the leaders in the IT, engineering, and accounting and finance sectors,” said Joerres in the conference call.

Kelly Flynn, analyst at Credit Suisse Group AG, increased Manpower’s target price from $59 to $63 after the earnings announcement. “Despite the uncertain near term earnings outlook, we think recent improvements in employment-related economic data will cause investors to afford MAN shares a higher peak earnings multiple than they have in recent quarters,” Flynn said in an analyst note released Wednesday.

Looking forward, Manpower said it projects first-quarter loss in the range of 5 to 15 cents per diluted share, compared with a loss of 62 cents in the year-earlier quarter. Analysts are estimating losses of 5 cents per share in the first quarter and $1.11 for all of 2010. 

But the company expects revenues to rise. “We are anticipating positive year-over-year revenue growth for the company as a whole, which is the first time since the third quarter of 2008,” said Joerres.

For the full year, Manpower lost $9.2 million, or 12 cents per diluted share, down from a profit of $205.5 million, or $2.58 per diluted share, in 2008. Sales decreased by 26 percent to $16 billion from $21.5 billion a year earlier.

Manpower’s stock closed at $55.17, up $2.01.


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