Leading staffing firm Robert Half International Inc. RHI reported in-line earnings in the third quarter of 2015 owing to consistently rising demand for staffing services. However, revenues lagged the consensus mark. Shares declined 3.76% in after-market trading.
Third-quarter 2015 earnings of 73 cents per share met the Zacks Consensus Estimate, and exceeded the prior-year quarter adjusted earnings of 63 cents by 15.9%. Earnings came within the guided range of 70 cents to 75 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 22 consecutive quarters on a year-over-year basis.
Robert Half's total revenue grew 7.4% year over year to $1.313 billion, driven by broad-based revenue gains and higher demand for Robert Half's professional staffing and consulting services owing to improved labor markets. In fact, consolidated quarterly revenues hit record levels, fueled by strong results from Protiviti, Robert Half Technology and permanent placement operations.
On a constant currency basis, revenues grew 11%. Revenues were within management’s guidance range of $1.295–$1.345 billion. It however lagged the Zacks Consensus Estimate of $1.321 billion by 0.6%, possibly due to currency headwinds.
Gross margin expanded 60 basis points (bps) to 41.9% in the third quarter driven by higher year-over-year sales. Operating margin increased 80 bps to 12.1% 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 reported under the Protiviti division.
Global Staffing Division: Global Staffing revenues, on a constant currency basis, increased 8.8% year over year, driven by 10.3% growth in U.S. revenues and 3.9% growth in international revenues. Currency had a negative impact of 3.8% during the quarter.
Protiviti: On a constant currency basis, Protiviti revenues increased 23%, driven by 24.4% growth in U.S. revenues and 16.4% growth in international revenues. Currency had a negative impact of 2.7% during the quarter.
Financial Update
Robert Half had cash and cash equivalents of $251.8 million at the end of third quarter, compared with $313.1 million at the end of the second quarter. Capital expenditure was $18.8 million in the third quarter compared with $16 million in the second quarter.
During the quarter, the company paid $25 million to its shareholders through a dividend of 20 cents per share. Robert Half also repurchased 1.6 million shares for $82 million. There are approximately 1.8 million shares available for repurchase under the board-approved stock repurchase plan.
Fourth Quarter 2015 Guidance
The company issued earnings and sales guidance for the fourth quarter of 2015. Robert Half expects revenues in the range of $1.285–$1.335 billion for the fourth quarter, representing an increase of 7% on a reported basis and 10% on a constant currency basis. The company expects earnings in the range of 67 cents –72 cents per share, which implies a growth rate of 12% from the comparable period last year. The Zacks Consensus Estimate for the fourth quarter stands at 72 cents, in line with the higher end of the company guided range.
Robert Half carries a Zacks Rank #2 (Buy).
Other well-positioned stocks in the staffing industry include Kforce, Inc. KFRC, Resources Connection, Inc. RECN and Manpower, Inc. MAN. All of them hold a Zacks Rank #2.
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