Balanced View on Robert Half - Analyst Blog

On Jun 13, 2014, we issued an updated research report on Robert Half International Inc RHI.

This global staffing firm reported first-quarter 2014 results on Apr 24 wherein it delivered earnings of 45 cents, ahead of the prior-year quarter adjusted earnings by 12.5%. Earnings also beat the Zacks Consensus Estimate by a penny. In fact, the company's earnings have now grown in double-digits for 16 straight quarters on a year-over-year basis, driven by growing demand for skilled workforce and consulting services.

Robert Half's total revenue was in line with the Zacks Consensus Estimate and grew 5.9% year over year to $1.08 billion in the first quarter, driven by solid performance in the company's permanent placement and technology staffing divisions.

The year-over-year increase was driven by solid demand for services provided by skilled professionals in the U.S. The company's international operations also improved, mainly in some European countries, particularly driven by permanent placement services. Higher sales, mainly driven by Protiviti operations, also boosted the company's operating margin.

Protiviti is one of the key drivers of revenue and operating performance at Robert Half. It helps companies solve problems in finance, technology, operations, governance, risk and internal audit. The strong Protiviti performance has been adding to year-over-year growth rates of the U.S. staffing revenues and to global operating income since many quarters. The company expects the momentum to continue in the upcoming quarters with an expected improvement in the economy in 2014 and beyond.

We are impressed with the fact that Robert Half's revenues have been increasing since the past three years, driven primarily by broad-based and increasing demand for the company's professional staffing services, particularly in the U.S. According to Robert Half, the demand for skilled professionals at small and midsized businesses will increase in 2014.

However, we should keep in mind that demand for permanent placement services is more sensitive to economic and labor market conditions than demand for temporary and consulting staffing services. Though permanent placement staffing revenues increased in first-quarter 2014, the company expects weakness in permanent placement services, going ahead.

In addition, prolonged economic downturn has been pressurizing almost every business of Robert Half in the U.S. Moreover, the ongoing debt crisis in Europe has hurt demand for recruitment services internationally. Fluctuations in currency values also have an adverse impact on the profitability of the company, as Robert Half derives a considerable portion of revenues from foreign countries.

Robert Half holds a Zacks Rank #3 (Hold).

Key Picks from the Sector

Other better-ranked stocks in the staffing industry include Manpower Group, Inc. MAN, CTPartners Executive Search Inc. CTP and Kforce Inc. KFRC. While Manpower Group holds a Zacks Rank #1 (Strong Buy), CTPartners and Kforce hold a Zacks Rank #2 (Buy).