By
Rich Smith
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More Articles
April 25, 2006
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One of my daughter's favorite TV shows is Maggie and the Ferocious Beast -- in which the "Beast" is actually quite a friendly fellow. That's my awkward segue into suggesting that not all monsters should be feared. When Monster Worldwide (Nasdaq: MNST ) reports its Q1 2006 numbers tomorrow before the market opens, some investors will scream in horror, and others will rush to embrace the job-search giant. Read on to learn what you'll need to know, so you can react accordingly.
What analysts say:
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Buy, sell, or waffle? Of the 21 analysts following Monster, 12 rate the stock a buy, and nine more give it a hold.
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Revenues. Analysts expect Monster to report 14% revenue growth tomorrow, to $282.4 million.
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Earnings. But they also expect the company to transform that modest sales gain into a 59% rise in profits. The target is $0.27 per share.
What management says:
Reviewing Monster's own review of the previous fiscal year quickly makes it clear that the company expects Europe to drive its future success. Monster boasted that its site was named the No. 1 job site in Europe, and CEO Andrew J. McKelvey made a point of noting that "overseas, Monster's organic revenue growth rate improved for the second quarter in a row, with International growing 46% year to year," whereas in North America, the company merely "continued to attract thousands of new customers each month."
What management does:
That doesn't mean that North America is the albatross around Monster's corporate neck, however. Stateside sales generated by the eponymous site still grew 31% last year, and margins have been rising steadily over the past 18 months.
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Margins %
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9/04
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12/04
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3/05
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6/05
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9/05
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12/05
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Gross
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100
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100
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100
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100
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100
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100
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Op.
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12
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13
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14.7
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15.4
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16.7
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17.5
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Net
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8.8
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9.7
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8.9
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8.7
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9.3
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10.9
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All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ending in the named months.
One Fool says:
That said, the clearest potential for gangbusters growth lies across the Atlantic and Pacific. Between 2004 and 2005, Monster more than doubled the growth rate it achieved here in the Western Hemisphere, growing sales by 68%. True, this division became a money-loser in the process, but I'm guessing that owed a lot to investments made to grow the business.
Why make those investments? Because the bigger the international division gets, the more it will develop the same kinds of economies of scale that have Monster's North American division earning a 34% operating margin. Right now, the international division sports a negative-3% operating margin, and it's about one-third the size of the North American division. Over time, if Monster can achieve international growth and bring its margins up to the levels it has achieved here at home, the potential for profits growth is obvious.
Competitors:
- Korn/Ferry (NYSE: KFY )
- Kforce (Nasdaq: KFRC )
- Workstream (Nasdaq: WSTM )
- Yahoo! (Nasdaq: YHOO )
- New York Times (NYSE: NYT )
- Washington Post (NYSE: WPO )
Fool contributorRich Smithdoes not own shares of any company named above.
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