Robert Half International Inc (RHI) is set to report third-quarter 2014 results after the market closes on Oct 21. Last quarter, this global staffing firm posted a positive surprise of 5.77%. Let’s see how things are shaping up prior to the announcement.
Factors to Consider
Strong revenue growth boosted by broad-based and increasing demand for the company’s professional staffing services, particularly in the U.S. have proved to be Robert Half’s strength for the past three years. Also, the company’s earnings have grown in double digits for 17 consecutive quarters on a year-over-year basis, driven by growing demand for skilled workforce and consulting services.
Robert Half’s subsidiary Protiviti is also one of the key drivers of revenue and operating performance. It helps companies solve problems in finance, technology, operations, governance, risk and internal audit. The company expects the momentum to continue in the upcoming quarters with an expected improvement in the economy in the second half of 2014 and beyond.
With the current improvement in the labor market, the company expects to generate accelerated revenues in the near term. The company’s international operations also improved, particularly in Europe, owing to increased demand for permanent placement services in the first half of 2014. Though permanent placement staffing revenues increased in the first half of 2014, the company expects weakness in permanent placement services, going ahead.
Fluctuations in currency values also have an adverse impact on the profitability of the company, as Robert Half derives a considerable portion of revenues from foreign countries.
In addition, a prolonged economic downturn has been putting pressure on almost every business in the U.S. In fact, the company expects results to be hurt by general macroeconomic conditions in the upcoming quarters.
Earnings Whispers?
Our proven model does not conclusively show that Robert Half is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Zacks ESP: ESP for Robert Half is 0.00%.
Zacks Rank #3 (Hold): Robert Half’s Zacks Rank #3 when combined with an ESP of 0.00% makes surprise prediction difficult.
We caution against stocks with Zacks Ranks #4 and #5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Other Stocks to Consider
Other stocks worth considering in the consumer staples/retail sector that have both a positive earnings ESP and a favorable Zacks Rank are:
Post Holdings, Inc. (POST) with an Earnings ESP of +50.0% and a Zacks Rank #1 (Strong Buy).
Hershey Co. (HSY) with an Earnings ESP of +2.78% and a Zacks Rank #3
Newell Rubbermaid Inc. (NWL) with an Earnings ESP of +1.82% and a Zacks Rank #3.
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