While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a look at particularly stock-shaking analyst upgrades and downgrades -- just in case their reasoning behind the call makes sense.
What: Shares of ManpowerGroup (NYSE: MAN ) closed up 2.4% yesterday after Bank of America upgraded the recruitment services specialist to buy from neutral.
So what: Along with the upgrade, analyst Sara Gubins raised her price target on the stock to $85 per share (from $71), representing about 14% worth of upside to where the stock sits now. A recent staffing trip to Paris confirmed that the environment in France -- where Manpower derives about quarter of its revenue -- was indeed stabilizing, suggesting the possibility of upside profit surprises in the near term.
Now what: Gubins remains cautiously optimistic over a full recovery in France. "Our MAN-weighted GDP model would suggest 8% revenue growth in 2014. We, and consensus, are more cautious at 4%," noted Gubins. "We continue to forecast a 1% revenue decline in France in 2014. Each 100bp faster revenue growth for MAN would add $0.15 to EPS, or 3%, based on a 10% incremental margin." With Manpower's shares now up about 115% from its 52-week lows and trading at a near-30 P/E, I'd wait for those headwinds to be factored more fully into the valuation before jumping in.
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