What happened
Shares of staffing company Robert Half International (RHI 1.32%) rose 12.6% in January, according to data from S&P Global Market Intelligence. While most of the move appeared to track the rise in the S&P 500 index, the market reacted favorably to the company's fourth-quarter earnings report and led the stock to outperform the market by around 5%.
So what
When the economy sneezes, staffing companies catch a cold, since their clients will start to hold back on new hiring. In that context, the worries over growth in the global economy that appeared in the last quarter of 2018 must have concerned Robert Half investors.
Image source: Getty Images.
Thus, when the company reported a good set of earnings and management gave positive guidance, the stock appreciated as investors realized underlying conditions remain favorable.
Fourth-quarter revenue came in toward the high end of management's guidance range, and earnings were above what management predicted three months ago. Moreover, U.S. and international permanent hiring revenue grew by double digits in the quarter, and guidance for the first quarter implies 10% revenue growth at the midpoint of the forecast range.
Not only do companies continue to hire -- CEO Max Messmer talked of small business optimism in the U.S. as being near historical levels -- but the company is also benefiting from favorable conditions in the global labor market. Specifically, Messmer painted a picture of a global jobs marketplace characterized by skills shortages that are creating a "candidate short market" -- good news for staffing companies -- and Robert Half reported a sequential increase in bill rates in the fourth quarter.
Check out the latest Robert Halfearnings call transcript.
Now what
The current outlook is good, and investors can look forward to the coming quarter. However, by management's own admission, its visibility is limited, as conditions in the labor market can change very quickly. With that in mind, investors need to keep a close eye on trends in the global economy.
