Employers Man-Up With ManpowerGroup Inc
The price action in ManpowerGroup Inc (NYSE: MAN) has been trending lower for the last 12 but that trend has come to an end. A combination of institutional buying and fantastic results have price action confirming support and ready to begin moving higher. The key takeaways from the report are that revenue growth is present, margins are widening, and the guidance was raised despite headwinds for the business. Among the headwinds is the sale of the Russian business which was, fortunately, concluded before the situation in Ukraine erupted, and negative FX headwinds that cut $0.20 off of the bottom line result.
The institutions have been on board the ManpowerGroup story for some time, as have we. While there are issues with the labor market hiring and demand for hires is strong and driving business for this company. That’s why the institutions purchased a net $0.441 billion worth of the stock or about 9.5% of the market cap over the last 4 quarters and why they are still buying now. The calendar Q2 activity has, so far, been net-bullish and we expect the trend to continue based on the FQ1 earnings results. The total ownership is nearly 95% and another bullish factor that we see aiding upward momentum in share prices.
ManpowerGroup Moves Up On Strong Guidance
ManpowerGroup reported a strong quarter supported by growth in newly acquired businesses and widening margins. The company reported $5.14 billion in net consolidated revenue for a gain of 4.5% over last year and beat the Insidertrades.com consensus by 120 basis points. The gain was driven primarily by a 31% increase in the Experis business aided by a 10% gain in Talent Solutions. The core ManpowerGroup segment declined by 2.0% as reported but grew 5% on an organic basis. The company reports record levels of permanent recruitment along with strength in higher-margin services.
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The margins widened at both the gross and operating levels due to revenue strength and mix. The gross profit increased by 16.8% while the operating profit grew by a more substantial 40.9%. More importantly, the GAAP earnings of $1.68 are up from last year's $1.11, a gain of 51.35% that is bolstered by share repurchase activity. Turning to the guidance, the outlook for the year is even better because the guidance is not only increased but to a range well above the consensus and one that suggests business trends remain strong.
ManpowerGroup Powers A Healthy Capital Return Program
ManpowerGroup has a healthy capital return program that includes dividends and share repurchases. The company repurchased $60 million worth of its shares during the quarter while paying a dividend worth 2.85% in yield while reducing its overall debt which is nearly negligible, to begin with. The dividend itself is only 36% of the earnings estimate and we know that estimate is too low. The dividend has also been growing and has been increased annually for the last 11 years at an 8% CAGR. We expect that trend to continue as well.
The Technical Outlook: ManpowerGroup Confirms Support
Shares of ManpowerGroup are up more than 7% in the wake of the Q1 earnings report and are likely heading higher. The move is supported by both the MACD and stochastic which are showing strong buy signals driven by strong results. The next hurdle for the market will be the $100 level and, if it is broken, a double bottom reversal will be in play.
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