Leading staffing firm Robert Half International Inc. (RHI) reported better-than-expected fourth quarter and 2014 results on consistently rising demand for staffing services. Shares rose 3.01% following the release.
Fourth-quarter 2014 earnings of 62 cents per share exceeded the prior-year quarter adjusted earnings of 49 cents by 26.5% and the Zacks Consensus Estimate of 61 cents by 1.6%. Earnings matched the higher end of management’s guidance range of 57 cents to 62 cents per share.
Robert Half witnessed strong year-over-year earnings growth driven by solid demand for services provided by skilled professionals as well as a growing labor market in the U.S. The company’s international operations also improved, particularly driven by higher demand for staffing and consulting services. In fact, the company’s earnings have now grown in double digits for 19 consecutive quarters on a year over year basis.
Robert Half's total revenue grew 13% year over year to $1.22 billion, marking the fifth consecutive quarter in which demand for staffing and consulting services accelerated. On a constant currency basis, revenues grew 15%. Revenues were at the higher end of management’s guidance range of $1.175-$1.225 billion. It also beat the Zacks Consensus Estimate of $1.21 billion by 0.8%.
Total gross profit was $500.8 million in the reported quarter, up 13% year over year. Gross margin expanded 10 basis points (bps) to 41.0% in the fourth quarter driven by higher sales.
Total operating income surged 28% to $133.2 million in the quarter. Operating margin increased 130 bps to 10.9% in the quarter on the back of higher gross margins and solid Protiviti results.
Segment Details
Based on the nature of services, the company has three reportable operating segments namely, Temporary and Consultant Staffing; Permanent Placement Staffing and Risk Consulting and Internal Audit Services.
Revenues from Temporary and Consultant Staffing and Permanent Placement Staffing come under the global staffing division, while the Risk Consulting and Internal Audit Services are provided under the Protiviti division.
Global Staffing Division: Global Staffing revenues, on a constant currency basis, increased 14% year over year, driven by 15% growth in U.S. revenues and 11% growth in international revenues. Currency had a negative impact of 1.9% during the quarter.
Overall staffing gross margin expanded 40 bps to 42.7% led by solid margin in Temporary and Consultant Staffing and Permanent Placement operations.
Operating margin of the staffing division was 10.7%, led by 9.9% margin in Temporary and Consultant Staffing operations and strong margin of 17.8% in Permanent Placement operations.
Protiviti: On a constant currency basis, Protiviti revenues increased 22%, driven by 27% growth in U.S. revenues and 5% growth in international revenues.
Segment gross margin was 30.7%, down 110 basis points from the prior-year quarter while operating margin was 12.4%.
2014 Results
In 2014, earnings of $2.26 per share exceeded the prior-year earnings of $1.83 by 23.5% and the Zacks Consensus Estimate of $2.24 by 0.9%. Total revenue grew 10.6% year over year to $4.70 billion. It also beat the Zacks Consensus Estimate of $4.69 billion by 0.8%.
Financial Update
Robert Half had cash and cash equivalents of $287.1 million at the end of the fourth quarter compared with $290.9 million at the end of the third quarter. Capital expenditure was $27 million in the fourth quarter, as against $13 million in the third quarter.
During the quarter, the company paid cash dividend of 18 cents to stockholders on Dec 15, 2014 and repurchased 0.8 million shares for $46 million. At the end of the fourth quarter, approximately 4.8 million shares remain available for repurchase under the stock repurchase plan.
First Quarter 2015 Guidance
The company issued earnings and sales guidance for the first quarter of 2015. Robert Half expects revenues in the range of $1.195–$1.245 billion for the first quarter, representing an increase from $1.08 billion last year. The company also expects earnings in the range of 53 cents –58 cents per share, as against 45 cents during the comparable period last year. The Zacks Consensus Estimate for the first quarter stands at 55 cents, within the company guided range.
Robert Half carries a Zacks Rank #3 (Hold).
Better-ranked stocks in the staffing industry include Resources Connection Inc. (RECN), Cross Country Healthcare, Inc. (CCRN) and Korn/Ferry International (KFY). While Resources Connection sports a Zacks Rank #1 (Strong Buy), Cross Country and Korn/Ferry hold a Zacks Rank #2 (Buy).
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