Manpower Earnings: Despite Suboptimal Performance, We Modestly Raise Our Fair Value Estimate

No-moat Manpower MAN reported first-quarter results at the lower end of its earnings guidance, much like 2022′s fourth quarter. We have raised our fair value estimate to $102 per share from $101, driven mainly by the time value of money. Management released second-quarter EPS guidance of $1.63 at the midpoint, a significant decline from last year’s second-quarter EPS of $2.29. Nonetheless, we still think the stock has modest upside, as it now trades in 4-star territory. Despite the near-term uncertain macroeconomic environment, Manpower’s diverse geographic footprint, expertise in specialized talent, and strategic investments give us confidence in our long-term thesis.

During the first quarter, consolidated revenue declined 7.6% year on year to $4.8 billion, nearly flat sequential growth compared with 2022′s third and fourth quarters. Total operating margin declined 20 basis points year on year to 2.5%, and diluted EPS dropped 10% to $1.51. Consistent with last quarter’s downward trend, demand for staffing continued to soften throughout multiple sectors. Enterprise clients, particularly in the transportation, construction, and manufacturing industries, dialed back on bullish hiring and are now focused on finding specialized talent. Therefore, we’re not surprised to see a year-on-year decline in revenue growth across most of Manpower’s covered regions, including the Americas, Southern Europe, and Northern Europe. We attribute Manpower’s weaker performance relative to other quarters to a decrease in order volume, a trend exhibited by other industry peers as well. We expect sales will recover when the macroeconomic environment improves.