Why Is Manpower (MAN) Down 5.2% Since Last Earnings Report?

Zacks Equity Research

A month has gone by since the last earnings report for ManpowerGroup (MAN). Shares have lost about 5.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Manpower due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

ManpowerGroup Q1 Earnings Beat Estimates

ManpowerGroup reported better-than-expected first-quarter 2019 results.

Earnings per share (excluding restructuring charge) of $1.39 beat the Zacks Consensus Estimate by 4 cents and decreased 19.2% on a year-over-year basis. Revenues of $5.05 billion surpassed the consensus mark by $123 million and declined 8.6% year over year on a reported basis and 2.2% on a constant-currency basis.

Segmental Revenues

Revenues from America totaled $1 billion, down 1.5% year over year on a reported basis but up 3% on a constant-currency basis. Revenues declined both in the United States and Other Americas subgroups. The segment contributed 20% to total revenues. Revenues from Southern Europe were down 9.1% on a reported basis and 1.6% on a constant- currency basis to $2.1 billion. Revenues declined across France, Italy and Other Southern Europe. The segment contributed 42% to total revenues. Northern Europe revenues decreased 16.1% on a reported basis and 8.8% on a constant-currency basis to $1.19 billion. The decline was due to weakness in UK, Germany, Belgium and the Netherlands. The segment accounted for 23% of total revenues in the quarter.

APME revenues totaled $699.9 million, down 2.8% on a reported basis but up 1.9% on a constant-currency basis.  Revenues grew in Japan, China, India, Thailand, Malaysia, Singapore and declined in Australia and New-Zealand. The segment contributed 14% to total revenues. Revenues from the Right Management business declined 8.4% year over year on a reported basis and 4.5% on constant-currency basis to $45.8 million. The downside can be attributed to reduced outplacement activity. The segment contributed 1% to total revenues.

Operating Performance

Gross profit in the fourth quarter was $804.8 million, down 9.1% year over year on a reported basis and 3% on a constant-currency basis. Gross profit margin came in at 16%, down slightly year over year. Operating profit of $105.5 million declined 31.4% year over year on a reported basis and 26% on a constant-currency basis. Operating profit margin came in at 2.1%, down 70 basis points (bps) year over year.

The America segment’s operating profit amounted to $31.2 million, down 27.2% year over year on a reported basis and 26.1% on a constant-currency basis. Operating profit from Southern Europe was $86.9 million, down 11.1% on a reported basis and 3.9% on a constant-currency basis. APME registered an operating profit of $20.1 million, which declined 22.3% on a reported basis and 19.1% on a constant-currency basis. The Northern Europe segment’s operating profit declined 96.2% year over year on a reported basis and 95.3% on a constant-currency basis to $0.6 million. The Right Management segment’s operating profit was $2.1 million, down 67.7% on a reported basis and 66% on a constant-currency basis.

Balance Sheet and Cash Flow

ManpowerGroup exited the first quarter with cash and cash equivalents’ balance of $566.3 million compared with $591.9 million in the prior quarter. Long-term debt at the end of the quarter was $1 billion compared with $1.03 billion in the preceding quarter. The company generated $101.9 million of cash from operating activities and spent $10 million on capex in the quarter. It repurchased 1.2 million shares for $101 million.

Second-Quarter Outlook

ManpowerGroup anticipates earnings per share in the range of $1.96-$2.04. The guidance includes a negative impact of 10 cents from foreign currency. The company’s revenue guidance is between 1% decline and 1% growth on a constant-currency basis. Further, the company anticipates its income tax rate in the second quarter to be around 35.5%.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

At this time, Manpower has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.


Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Manpower has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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