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51job Inc. Earnings: It's a Hire Sale

By Rick Munarriz – Nov 11, 2016 at 9:31AM

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The Chinese online recruiter delivers another quarter of double-digit revenue growth.

Image source: 51job.

China's economic growth may be slowing in recent years, but if we put up 51job (JOBS) as a bellwether, it's fair to say that there's still a lot of hiring taking place in the world's most populous nation. The Shanghai-based provider of online recruitment services posted encouraging financial results after Thursday's market close. 

The company is checking in with third-quarter revenue of $89.2 million, a gain of 13.3% over the prior year's showing. The performance finds 51job landing near the high end of its earlier guidance targeting $86.5 million to $89.5 million in revenue. After back-to-back quarters of decelerating top-line growth to start the year, 51job is starting to pick up the pace. The year-over-year increase in revenue during the second quarter was a mere 10.2%. 

There was growth in both of 51job's major internet-fueled businesses. Online recruitment services -- accounting for a little more than two-thirds of the revenue mix -- came through with a 16.5% advance. Other human-resource-related revenue checked in with a more modest 8.2% gain. A new value-added-tax policy change in China that went into effect in May is holding that category back. 

What used to be 51job's third business segment -- print advertising revenue generated from an original business of inserting sponsored job listings in regional newspapers -- is no longer around. The company killed off the last of its 51job Weekly inserts late last year.

The bottom line

The strong showing on Thursday pushes 51job's streak of double-digit growth in revenue to six straight quarters. Growth has been fairly consistent in that time, climbing between 10.2% and 16.4% on a year-over-year basis. If we go back a bit more we see 51job coming through with double-digit top-line growth in 14 of the past 15 quarters.

The path down the income statement finds 51job's operating margin contracting, mostly as a result of a nearly 24% spike in sales and marketing costs. Aggressive headcount additions (because 51job is hiring, too) and an uptick in advertising expenses ate away at 51job's profitability, but the $0.43 a share it ultimately posted in adjusted earnings is better than the $0.37 to $0.40 a share that it was forecasting three months ago.

In its outlook, 51job is encouraged by its near-term prospects. Its fourth-quarter guidance calls for an adjusted profit of $0.46 to $0.49 a share on between $102 million and $105 million in revenue. This will be the first time that 51job's top line tops nine figures (translated to U.S. dollars, naturally).

It's too soon to issue an outlook for 2017, but 51job points out during its conference call that conversations with its clients show continuing strength in China's labor market. There were 334,401 customers relying on 51job to help them fill vacancies as of the end of September, 13% ahead of the prior year's tally -- and they're spending more through 51job, on average. Investing in China may not be for the risk-averse, but 51job continues to be one of the steadier players in the market.

Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends 51job. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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