Deutsche Bank: Avoid Staffing Stocks In 2016

  • While Robert Half International Inc. RHI shares are down year-to-date, shares of ManpowerGroup Inc. MAN and On Assignment, Inc. ASGN have surged.
  • Deutsche Bank’s Paul Ginocchio downgraded the ratings on the companies from Buy to Hold.
  • Majority of the labor cycle seems to be over and the probability of being close to the end continues to rise, Ginocchio said.

Analyst Paul Ginocchio wrote, “While it's hard to predict the end of a cycle, we think the probability of being close to the end continues to rise based on the temp and macro data.” While the labor market is tight and incremental temp usage continues to decline, the confirmation of late cycle would be a jump in Robert Half’s US permanent placement fee growth.

“While we are confident its later cycle, we are not yet confident in calling a recession in late 2016 or early 2017, which we think needs to occur for the stocks to meaningfully underperform from here,” Ginocchio added.

ManpowerGroup

The analyst reduced the price target for the company from $95 to $83. He added that ManpowerGroup’s substantial share buyback and the improving European PMIs keep EPS stable to slightly higher in the near term.

The EPS estimate for 2016 has been reduced by 2 percent from $6.14 to $6.02, to reflect FX headwinds and lower organic growth expectations.

Robert Half International

Ginocchio reduced the price target for the company from $60 to $47. He said that a potential acceleration in perm placement fees in 2016 is likely to result in the consensus EPS being raised, which would help offset the expected multiple contraction.

The EPS estimate for 2016 has been reduced by 2.5 percent from $3.20 to $3.12, to reflect currency headwinds and lower organic growth estimates.

On Assignment

Ginocchio said that of all the Hold ratings, “we feel relatively more positive” on On Assignment due to its IT staffing exposure. The EPS estimate for 2016 has been left unchanged at $3.18.

The Morgan Stanley report noted, “With our view that we are late cycle, we have adjusted our price targets to reflect late cycle multiples. However, we value ASGN at 19x, which is a discount to its recent trading range.”

Posted In: Deutsche BankHuman Resource & Employment ServicesIndustrialsPaul GinocchioAnalyst ColorDowngradesPrice TargetAnalyst Ratings

Ad Disclosure: The rate information is obtained by Bankrate from the listed institutions. Bankrate cannot guaranty the accuracy or availability of any rates shown above. Institutions may have different rates on their own websites than those posted on Bankrate.com. The listings that appear on this page are from companies from which this website receives compensation, which may impact how, where, and in what order products appear. This table does not include all companies or all available products.

All rates are subject to change without notice and may vary depending on location. These quotes are from banks, thrifts, and credit unions, some of whom have paid for a link to their own Web site where you can find additional information. Those with a paid link are our Advertisers. Those without a paid link are listings we obtain to improve the consumer shopping experience and are not Advertisers. To receive the Bankrate.com rate from an Advertiser, please identify yourself as a Bankrate customer. Bank and thrift deposits are insured by the Federal Deposit Insurance Corp. Credit union deposits are insured by the National Credit Union Administration.

Consumer Satisfaction: Bankrate attempts to verify the accuracy and availability of its Advertisers' terms through its quality assurance process and requires Advertisers to agree to our Terms and Conditions and to adhere to our Quality Control Program. If you believe that you have received an inaccurate quote or are otherwise not satisfied with the services provided to you by the institution you choose, please click here.

Rate collection and criteria: Click here for more information on rate collection and criteria.