Manpower Earnings: We Decrease Fair Value Estimate Given Weak Results but See Upside Long Term

We decrease no-moat-rated Manpower’s MAN fair value estimate to $102 from $109, as hiring demand continues to soften globally. Manpower’s third-quarter results of $4.68 billion in consolidated revenue and $0.60 in diluted earnings per share were below both our expectations and management’s previous guidance. Management released more cautious guidance for the fourth quarter, predicting revenue to decline by 5% and for EPS to be $1.22, at each respective midpoint. We also curb our full-year revenue forecasts across geographic segments. Nonetheless, we think the stock remains undervalued and trades at a more than 25% discount as of this writing.

During the third quarter, consolidated revenue declined 2.6% year on year to $4.68 billion. Total operating margins dropped 190 basis points to 1.5%, marking the worst quarterly margin performance in the past three years. Similarly, diluted earnings per share of $0.60 is also the lowest since third-quarter 2020. We attribute Manpower’s recent suboptimal performance to temporary and cyclical factors. The sale of Manpower’s Philippines business, in addition to foreign current losses and restructuring costs related to its hyperinflationary Argentina business, significantly and negatively impacted results.

Moreover, persisting economic uncertainty continues to discourage companies from actively hiring. That said, we expect sales to rise when the macroeconomic environment improves. We anticipate a strong rebound especially in Talent Solutions and Experis, both of which are Manpower’s higher-margin business lines known for their brands and internal pools of highly skilled candidates. Companies will continue to advance their digital and technological capabilities, driving demand for IT-related talent.