Robert Half International is Friday's IBD Stock Of The Day, after the staffing firm topped Q4 estimates and offered solid guidance for the first quarter. RHI stock traded lower in today's stock market action, but has recently shown consistent relative strength.
Robert Half Earnings
Reporting after Thursday's close, Robert Half posted EPS of $1.51, up 80% from a year ago and 6 cents ahead of estimates. Revenue grew 36% to $1.77 billion.
"RHI reported a strong beat-and-raise with growth and margin improvement across all segments," wrote BMO Research analyst Jeffrey Silber.
Management offered a guidance range for Q1 EPS of $1.39 to $1.49. The consensus estimate from Zacks Investment Research is $1.27.
Silber downplayed some investor concerns that Robert Half's public-sector growth could reverse as pandemic stimulus dries up. He also noted that public-sector revenue made up just 6% of the company's Q4 total.
Silber kept an outperform rating on the shares, lifting his price target to 126.
RHI Stock
RHI stock slipped 0.6% to 110.29 on Friday. That put Robert Half stock just a shade below its 50-day moving average, and a few pennies above its 10-week line.
That setup isn't exactly compelling. So what makes RHI worthy of being highlighted as IBD Stock Of The Day? Its relative strength line, the blue line in the chart provided. That line tracks a stock's performance vs. the S&P 500. Robert Half's RS line on Thursday touched its highest level since the fall of 2018.
Further, RHI stock is forming a flat base, which leaves it 9% below a 120.93 buy point. If the market trend improves and a new confirmed uptrend follows, RHI could be a stock to watch.
If Robert Half stock breaks back above its 50-day line and this week's 113.60 high, it would be clearing the downsloping trend line drawn from its Nov. 5 record high. That could provide an early entry point for aggressive investors, but only if the market confirms a new uptrend.
So, be sure to read IBD's daily afternoon The Big Picture column in order to track the prevailing market trend.
Robert Half also offers another key strength. IBD's proprietary SMR rating, which identifies companies with superior sales growth, profit margins and return on equity ratios, credits Robert Half with an 'A' rating.
In Q4, Robert Half reported a 50% return on invested capital.
Remote-Work Era
Robert Half's strong relative strength — relative to both the overall market and the Commercial Services-Staffing industry group — is bucking expectations to some extent. RHI is known as an early cycle stock that has tended to underperform once the economic expansion and labor market reach mid-cycle.
Truist analyst Tobey Sommer hiked his RHI stock price target to 120 from 100 after the earnings report, but kept a hold rating, saying that RHI is likely to underperform the staffing industry in the current mid-cycle environment.
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Yet it's worth keeping an open mind about whether this cycle might be different, given changes in the economy accelerated by the pandemic. At least that's what comments on Thursday's earnings call from CEO Keith Waddell seemed to suggest.
Remote work "strengthens our competitive position significantly," putting a premium on its global network, advanced technology and data analytics needed for out-of-market recruitment, Waddell said. Local and regional firms, "our traditionally toughest competitors," lack those capabilities.
Waddell also highlighted the latest survey by small business trade group NFIB, showing 95% of firms had few or no qualified candidates for their openings. "This continues to bode well for us as we see increases in demand for our services on a very broad basis."
Please follow Jed Graham on Twitter @IBD_JGraham for coverage of economic policy and financial markets.
