ManpowerGroup: Bet on the Rise of the Temp

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Unemployment is declining in the United States, but the flip side to that coin is a long-term restructuring of the labor force. Companies are increasingly relying on part-time labor. That’s perhaps bad news for many workers, but it means a steady stream of business for third-party hiring agencies.

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Source: Manpower Lobby

ManpowerGroup (MAN) is a leading staffing and outsourcing firm with global operations that’s tapping the growing corporate need for labor flexibility.

This stock is a great play on the growing use of temporary labor at large companies. Employer concern over the cost of Obamacare’s health coverage mandates for full-time workers seems to be fueling this trend. Temp workers tend to get few, if any, benefits.

Corporate downsizing and outsourcing are two additional trends that are also boosting MAN’s business. More firms are outsourcing the value-added tasks undertaken by the “creative class,” which includes writers, editors, graphic designers, and “computer geeks.” These workers tend to be younger and may actually prefer the flexibility and freedom of freelance work.

As the global economy gives rise to the “virtual corporation,” the brick-and-mortar workplace is increasingly irrelevant. How can companies find these cost-effective, talented people? That’s where Milwaukee-based ManpowerGroup comes in, with its vast network of prospective employees and human resources connections.

With a market cap of $5.3 billion and 25,000 employees, ManpowerGroup provides temps for all fields, with a specialty in the most active outsourcing niches of IT, human resources and health care. The latter is a particularly ripe area of opportunity in the U.S., as the mandates of Obamacare require seasoned HR professionals who can make sense of the byzantine language of the sweeping health reform bill.

ManpowerGroup is larger and enjoys greater economies of scale than competitors such as Kelly Services (KELYA). ManpowerGroup also is extending its reach into emerging markets, especially the outsourcing havens of China and India, which have resumed their economic recovery, although at an uneven pace.

Impressive Third Quarter

ManpowerGroup reported impressive operating results in the third that bode well for future quarters.

For the third quarter of fiscal 2014, ManpowerGroup reported earnings of $130.5 million, an increase of 38% compared to the $94.7 million posted in the same quarter a year ago. Earnings per share (EPS) came in at $1.61, compared to $1.18 in the same year-ago period. Revenue reached $5.42 billion, up 4.4% compared to $5.19 billion in the prior year quarter

And yet, with a trailing 12-month price-to-earnings (P/E) ratio of 13.1, ManpowerGroup is a bargain compared to the trailing average P/E of 27 for its peers in staffing and outsourcing services.

The Bottom Line

The relentless — some would say ruthless — global trend of downsizing and outsourcing is prompting companies to rely increasingly on temporary workers. ManpowerGroup, through its diversification and global reach, is a leading source for these workers.

An entrenched position in recovering developed markets combined with expansion in emerging markets, positions this staff and outsourcing leader for future growth, as global corporations continue to permanently restructure their labor forces.

What’s more, this growth stock is a good value now, especially on the heels of a stellar earnings and revenue performance. This company may profit from temporary labor, but its growth potential is lasting.

As of this writing, John Persinos did not hold a position in any of the aforementioned securities.

 


Article printed from InvestorPlace Media, https://investorplace.com/2014/11/manpowergroup-profiting-rise-temp/.

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