Robert Half International Inc. RHI shares have appreciated 3.4 percent year-to-date period compared to a 9.8-percent drop in ManpowerGroup Inc. MAN, and this outperformance will continue, according to Barclays.
Analyst Manav Patnaik upgraded shares of Robert Half from Equal Weight to Overweight and hiked the price target from $62 to $66. At the same time, the analyst downgraded shares of Manpower from Equal Weight to Underweight and decreased the price target from $130 to $115.
Robert Half Set For Beats And Raises
An accelerating revenue growth trajectory and leverage to an improving U.S. economy are the twin premises behind Barclays' upgrade of Robert Half, Patnaik said in a Tuesday note. The company is well-positioned in the U.S. market, with the outlook having turned incrementally positive and numbers showing signs of improvement after a sluggish 2017, the analyst said.
Improving GDP growth and all-time high small business confidence have led to improving trends in the company's business, Patnaik said.
Barclays expects the outlook to hold as increasing participation eases a tight labor market.
"Ultimately, while 2017 saw RHI's revenue decline for most of the year, 4Q's turnaround, easing comps and [an] increasingly bullish outlook from management point to a setup for beats and raises that tend to drive staffing stocks," the analyst said.
Manpower Shares Could Be Pressured Near-Term
Although Barclays based its Underweight rating on Manpower on "relative underperformance," the firm views the shares as being under pressure in the short term. After solid 6-percent revenue growth in 2017, Barclays said tough comps and increasing competition in key markets limit the likelihood of acceleration.
Manpower's 4.5-5-percent EBITDA margin target is "uninspiring" and requires gross margin improvement, Patnaik said. Changes to the CICE program in France — which fetches the company 26 percent of revenues — for 2019 could have meaningful impact on earnings and tax implications, the analyst said.
Good news on the European recovery has largely been modeled into investor expectations for Manpower, Patnaik said.
The Price Action
Over the past year, shares of Robert Half have gained about 18 percent, while Manpower shares have added a more modest 11 percent.
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