ManpowerGroup (NYSE:MAN) certainly had a mixed quarter but the news is more bullish than not. While the revenue and earnings both fell short of the Marketbeat.com consensus estimates margins widened, cash flow was strong, shares were repurchased, and the dividend was paid. The dividend, notably, is yielding more than 3.3% with shares trading at their current levels and it is a safe payout. The company is distributing only 32% of its earnings while growing earnings and guiding the market higher. Based on our take on the labor market the company's business is stable if not strong so we are expecting to see the guidance raised again later in the year, and for the dividend to be increased a 13th consecutive year.
"As we start the third quarter, labor markets remain very solid and demand for talent is strong," said CEO Jonas Prising. "We continue to monitor those sectors in Europe where present-day supply-chain disruptions are impacting our business, particularly in the automotive industry. At the same time, we also believe the persistent level of talent shortage represents a significant opportunity for our business. We see this evidenced by the strong ongoing demand in our permanent recruitment services, in our RPO and MSP Talent Solution offerings, in our Experis IT resourcing and solutions, and across our Manpower Specializations.
ManpowerGroup Revenue Falls Short, Margin Widens
ManpowerGroup reported mixed results for Q2 but that is about the end of the bad news we can give. The company's $5.07 billion in revenue is down 3.8% from last year and missed by 360 basis points but mitigating factors like FX conversion, the sale of the business in Russia, and supply chain impact on business in Europe more than offset the miss. The FX conversion alone is worth nearly 1000 basis points of top-line result and puts revenue at up 6.0% on an adjusted basis. On a segment basis, The Americas led with a 44% increase in US revenue offset by declines everywhere else and most of those were due to dollar strength and not a weak business.
Moving down to the margin, earnings fell short of the consensus estimate as well but both the gross and operating margin improved versus last year. The gross margin improved by 7.1% while the operating margin widened by 6.3% compared to the negative top-line result. This is attributed to the sales mix which is favoring higher-margin businesses like Permanent Placement. Turning to the guidance, there is nothing mixed about it. The company is projecting Q3 earnings in a range of $2.19 to $2.27 compared to the consensus of $2.20 and this guidance includes an expected $0.29 headwind from FX conversion.
The Technical Outlook: ManpowerGroup Consolidates At Key Support Level
Price action in ManpowerGroup Inc hit a bottom a few weeks ago and has been consolidating at that level ever since. The post-release action has shares down but the price action is still well within the near-term range and above key support. Assuming the market is able to hold this level we see the stock moving sideways within a range that has $77.50 at or near the bottom. If the market is not able to hold this range the stock will most likely fall to $70 before hitting the next strong support level. Longer-term, we view this stock as a high-yield bargain, and one with a safe and growing dividend as well.
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