Want to know how the world economy is doing? Then turn off CNBC. Tune out the Fed's gum-flappery. Instead, drop in on Manpower's (NYSE:MAN) Q2 2007 earnings announcement Thursday morning. If taking the pulse of the economy is your gig, you won't find a better source than Manpower, whose business hinges on gauging the health of the economy and the hiring needs of its clients -- all around the world.

What analysts say:

  • Buy, sell or waffle? Of the 16 analysts following the company, seven think you should buy the stock, and nine say to just hold it.
  • Revenues. Wall Street is looking for 14% sales growth to $5.05 billion.
  • Earnings. Profits are predicted to leap 32% to $1.20 per share.

What management says:
Although difficult to quantify, possibly the most important announcement out of Manpower since it last reported earnings -- for shareholders and the rest of us investors -- was the May announcement that Cari Dominguez, chairwoman of the U.S. Equal Employment Opportunity Commission from 2001 to 2006, had joined the board of directors. In addition to her past work with Manpower peers Heidrick & Struggles (NASDAQ:HSII) and Dutch executive search firm Spencer Stuart & Associates, Dominguez should bring to Manpower an almost unique, high-level perspective on the overall employment market in the U.S.

The other interesting development this quarter was the good news from France's Central Agency for Social Security Organisations about a favorable tax modification for Manpower, which should add about 100 basis points to the firm's operating margin for 2006 results (yes, it's retroactive) and Q1 2007. Expect a boost to earnings from this ruling in tomorrow's news.

What management does:
More interesting will be whether the tax ruling helps out Manpower's margins in future quarters. I rather doubt it will, as the press release seemed to imply the ruling was just "found money." If that's the case, then keep it in mind when watching how the margins table below evolves over the next four quarters. We'll expect to see operating and net margins get a temporary bump, but slump back toward their most recent levels in a year. (Not that the recent margins are anything to complain about. I bet rivals Spherion (NYSE:SFN) and Kelly (NASDAQ:KELYA) would trade their one-and-change operating margins for Manpower's 3%-plus in a heartbeat.)

Margins

12/05

3/06

6/06

9/06

12/06

3/07

Gross

17.9%

17.8%

17.9%

17.9%

17.9%

17.9%

Operating

2.8%

2.9%

3.0%

3.2%

3.3%

3.3%

Net

1.6%

1.8%

1.8%

1.9%

2.3%

2.2%
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Many American workers would probably be surprised to learn that Milwaukee-based Manpower actually gets most of its revenues from outside the U.S. Investors, in contrast, need to be aware of this fact, and of how it benefits them.

Take the French tax breakb for example. One hundred basis points in additional operating margin for a business segment is good and all, but it's even better when you realize that France is Manpower's biggest single business unit, comprising nearly one-third of total revenues last quarter. It also produces the most profits: 34% of Manpower's operating profits come from France.

As a matter of fact, 72% of Manpower's global revenues come from Europe. In a weak-dollar world, where every euro you earn seems to buy more dollars today than it did yesterday, that's a good place to be earning profits.

Check out the history of this now long-in-the-tooth economic expansion, and Manpower's role in it, in:

Fool contributor Rich Smith does not own shares of any company named above. The Fool's disclosure policy never waffles.