3 Hot Staffing Companies for Employment Trends - Analyst Blog

Since the onset of the recession one of the fastest growing industry segments has been the Professional & Business Services segment (read temp jobs).  This segment has seen sustained traction for the past many quarters due to several economic situations, both domestically, and globally.  These “temp” jobs have been correlated to the overall unemployment levels over the past several years.  

In April, the unemployment rate dropped from 6.7% to 6.3% with the number of unemployed persons decreasing by 733,000.  According to the BLS Employment data, nonfarm payroll employment rose by 288,000 in April.  The upcoming May unemployment numbers are expected to be released on Friday June 6th, and the street is expecting an increase of 210,000 nonfarm payroll numbers.  

Looking Forward

According to the Palmer Forecast, the demand for temporary workers in the USA is expected to increase 8.5% on a seasonally adjusted basis for the second quarter 2014; this is after a 9.3% increase in Q1 2014.  More importantly, this would make the seventeenth consecutive quarter of year-over-year increases in the demand for temporary workers.  

Specifically, the Professional & Business services segment saw the greatest percentage of new jobs in April, accounting for just over 26% of the 288,000 jobs created (Education and Health Services was the second highest, accounting for 13.9% of total new jobs).  Moreover, Professional & Business service companies are expected to once again lead all industry segments in new hires in the coming quarters.  

Unemployment Predictions

On Friday June 6th, BLS will announce the unemployment rate, which is expected to rise slightly from 6.3% to 6.4%.  But more importantly, we will see if the continued hiring by staffing services still ranks as the largest job producing category.

Currently, there are three companies with a Zacks Buy rating in the Business Services Segment, which should see both the top and bottom lines positively impacted by the sustained hiring through the usage of staffing services.  

Companies to Consider

Manpowergroup MAN, a Zacks Rank #1 (Strong Buy), is a non-governmental employment services organization, located in the US, UK, and France.  The company provides a variety of staffing and workforce management services and solutions.  This company has had four consecutive quarters with a positive earnings surprise, with a four quarter average of 19.85%.  This company reports second quarter earnings on July 18.  Over the past sixty days, MAN's EPS estimate for Q2 has jumped from $1.21 to $1.32.  

Genpact Ltd G, a Zacks Rank #1 (Strong Buy), manages business processes for companies around the world.  They offer finance and accounting services, including account payable services, payment and inquiry management, preparation of financial statements, closing and reporting, cash management, and financial planning.  Like Manpower, Genpact has beaten earnings estimates for the past four consecutive quarters, with an average positive beat of 22.25%.  This company reports second quarter earnings on August 5.  Over the past sixty days, G's EPS estimate for FY 2014 has risen from $0.87 to $0.92.

Kforce Inc KFRC, a Zacks Rank #2 (Buy), is a full-service, web-based specialty staffing firm providing flexible and permanent staffing solutions for organizations and career management for individuals.  Over the past four quarters, KFRC has posted an average positive earnings surprise of 4.4%, and over the past sixty days KFRC's EPS estimate for Q2 has risen from $0.30 to $0.32.  

Conclusion

The economy grew at a 2.6% pace during the fourth quarter 2013, but in Q1 2014 we saw a large contraction, mostly due to the horrendous weather in the beginning of the year, which caused the rate to decline to -1.0%.   But information ranging from manufacturing to employment suggest that the economy will accelerate sharply in the second quarter 2014, and beyond.  During this bounce back, we should see more companies utilizing staffing services to fill their employment needs.  
 

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