Please ensure Javascript is enabled for purposes of website accessibility

51Job Faces the Hiring Line

By Rick Munarriz – Nov 9, 2018 at 9:24AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Chinese online recruiter delivers its third strongest top-line burst since 2010, but guidance is a party pooper.

Revenue growth is still going strong at 51job (JOBS), but guidance suggests that the top-line gains may be slowing. The Shanghai-based provider of online recruitment services posted strong financials for the third quarter after Thursday's market close, clocking in with its third consecutive period with revenue growth topping 30%. The challenge now is to get Wall Street to get over the aftertaste of its uninspiring glimpse of the fourth quarter.  

51job's revenue rose 31% in the third quarter, landing on a record $139 million. Three months ago, it was forecasting a top-line burst of just 26% to 30%. You have to go all the way back to 2010 to find the last time that 51job was growing its revenue at a clip of 30% or better, and now it has kicked off 2018 by doing that in each of the first three quarterly reports. 

51job employees on a patio balcony at corporate headquarters.

Image source: 51job.

Getting the job done

There is healthy growth across both of 51job's two major moneymakers. Online recruitment services increased, accounting for 68% of the revenue, rose 33%. Other human resources related revenue, which accounts for the other 32% increased 27% for the quarter. 

Average revenue per employer surged 39%, and if seeing that metric growing faster than overall top-line growth leaves you wondering if the number of companies filling job vacancies is shrinking, you'd be correct. The number of unique employers on the job listings platform has declined by 4% to 365,386 over the past year, but it's been largely by design. 51job has made it a strategic priority to focus on higher potential employers, weeding out certain customer accounts and being more choosy about who gets onto the platform. This isn't a new development. We saw the same scenario play out in the second quarter. 

Profitability surged during the quarter, but that was primarily the handiwork of one-time gains related to an asset sale gain and an accounting change in the fair value of its convertible senior notes. Adjusted earnings soared 53% to $0.74 a share, well ahead of 51job's per-share forecast of $0.56 to $0.60 three months ago. 

This brings us to the potentially thorny guidance. 51job is eyeing $158.7 million to $163.1 million in revenue for the fourth quarter, 25% to 28% where it was a year earlier in local currency. Investors knew that 30% growth wasn't going to be the new normal, but analysts were modeling a bit more on the top line. Wall Street pros were also holding out for more than the earnings per share of $0.65 to $0.69 that 51job is targeting for the fourth quarter. To be fair, 51job has historically been conservative with its guidance, but if the stock is weak on Friday, the culprit's hiding in plain sight.

51job remains a winning stock despite all of the volatility. It's moving higher for the third year in a row, and it's more than doubled since the start of last year. It's been weak lately -- down a blistering 44% since May in a downdraft that has taken down most Chinese growth stocks -- but that may help cushion the blow of the uninspiring guidance. 51job keeps getting the job done, even if its guidance this time around is well south of impressive.

Rick Munarriz owns shares of 51job. The Motley Fool recommends 51job. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

51job Stock Quote

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/07/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.