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World - Despite solid Q3 revenue growth, ManpowerGroup’s Q4 forecast tempered

22 October 2014

ManpowerGroup (MAN: NYSE), the third largest staffing firm in the world, reported revenue of USD 5.4 billion for the third quarter ending 30 September 2014. An increase of +4.6% in constant currency from USD 5.2 billion during the same period last year.

In their second quarter financial statement, ManpowerGroup forecast revenue growth of between +4% and +6% in constant currency during the third quarter. However, reported revenue growth of +4.4% was below prior guidance of between +5% and +7%.

The company achieved gross profit of USD 905.6 million during the quarter, an increase of +6.5% in constant currency from USD 853.6 million in Q3 2013. Operating profit rose by +30.6% in constant currency from USD 162.4 million in Q3 2013 to USD 212.3 million this year.

Jonas Prising, ManpowerGroup CEO, said, "Our third quarter results were strong, with solid revenue and profit growth in the majority of our operations and brands. While the economic recovery has recently become more choppy in some markets, we are still seeing growth opportunities and I am confident we are well positioned to deliver unique value to our clients in these uncertain times.”

According to the company’s financial statement, included in the third quarter results last year was a restructuring charge, primarily related to office consolidation and severance costs, of USD 8.1 million. There were no restructuring charges in Q3 2014 and net earnings in the third quarter were not materially impacted by changed in foreign currencies, compared with the same quarter last year.

Across the Americas, revenue rose by +6.5% in constant currency to USD 1.2 billion, up from USD 1.1 billion a year ago. Revenue from the United States rose by +5.1% in constant currency to USD 800.5 million, while revenue from Other Americas rose by +9.5% in constant currency to USD 388.5 million.

In Southern Europe revenue rose by +4.5% in constant currency to USD 2 billion, up from USD 1.9 billion in Q3 2013. In France, revenue rose by +2.2% in constant currency to USD 1.5 billion, while revenue derived from the Italian market increased by +9% in constant currency to USD 294.1 million. Across Other Southern Europe, revenue rose by +13.8% in constant currency to USD 259.9 million.

Northern Europe reported revenue growth of +6.2% in constant currency to USD 1.6 billion, while Asia Pacific Middle East (APME) revenue declined by -0.7% in constant currency to USD 592.5 million. 

The company’s Right Management division reported revenue of USD 71.6 million, a decrease of -8% in constant currency from USD 7.2 million in Q3 2013. Right Management is a counter-cyclical outplacement business, which contributes 1% of total ManpowerGroup revenue.

According to analysts, the failure of the company to achieve reported revenue growth of between +5% and +7% stemmed from underperformance in most regions versus prior estimates. This underperformance was led by the revenue decline reported by Right Management, combined with lower-than-expected results in Northern Europe, France, and APME.

Looking forward, the company expects to report revenue growth of between +2% and +4% in constant currency during the fourth quarter. Reported revenue, however, is forecast to decrease during the period by between -1% and -3%, against previous growth expectations of +4.8% in reported revenue.

Analysts noted, however, that the weak fourth quarter guidance is most likely due to an estimated unfavourable currency impact and that ManpowerGroup’s management typically provides conservative guidance.

Despite the company’s tempered outlook, ManpowerGroup’s share price closed up yesterday by +2.1% at USD 62.95, a decrease of -20.7% compared with a year ago. Based on its current share price, the company has a market value of USD 5 billion.