Please ensure Javascript is enabled for purposes of website accessibility

Robert Half International's Earnings Point to a Better Jobs Market

By Lee Samaha - Jan 30, 2015 at 10:17AM

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

Robert Half International's results and commentary suggest good times ahead.

The world's largest specialized staffing company, Robert Half International (RHI 1.43%), delivered a broadly positive set of fourth-quarter earnings on Thursday. In addition, management's commentary alluded to a tangible and positive shift in employment conditions. particularly in the U.S. As such, the company has entered the year in good shape, and the recent results contained many useful indicators of what its end markets could be like in 2015. Let's take a look at them in more detail.

Robert Half International fourth-quarter earnings
The headline numbers:

  • Fourth-quarter revenue of $1.22 billion versus internal guidance of $1.175 billion-$1.225 billion, and analysts' estimate of $1.21 billion.
  • Fourth-quarter non-generally accepted accounting principles earnings per share of $0.62 landed at the top end of internal guidance of $0.57-$0.62, and above analysts' estimate of $0.61.


  • First-quarter revenue of $1.195 billion-$1.225 billion is above analysts' estimate of $1.19 billion.
  • First-quarter non-GAAP EPS of $0.53-$0.58 straddles analysts' estimate of $0.55.

U.S. temporary and consulting services still the key
Robert Half generated nearly 76% of its operating income in 2014 from temporary and consulting services, with nearly 16% from permanent placement, and the rest coming from risk and internal audit services. In other words, the investment story is still about temporary staffing in the U.S.

On that note, CEO Max Messmer outlined his expectations for the company to continue benefiting from the trend toward corporations using temporary workers. For example, on the earnings call, he remarked that "in the United States alone, nearly 3 million people work on a temporary basis," adding that the share of total workforce taken by temporary workers was at an all-time high. This trend shows no sign of slowing.

In fact, all of the company's staffing segments appear to be on an adjusted uptrend. Here are the revenue growth rates for each staffing segment:

Source: Robert Half International presentations. Figures are for same billing days and at constant currency.

Skill shortages
There was good news in the report for U.S. job seekers, with Messmer saying, "the U.S. labor market had strengthened in recent months." Essentially, the moderate pace of economic recovery has held back permanent employment growth -- at least when compared to previous recoveries -- but there are signs the situation is starting to return to what Messmer called "classic" conditions.

The issue came up on the earnings call Thursday, with RBC Capital Markets analyst Gary Bisbee remarking, "Just looking back at the history, it seems like in the past few employment cycles, in the second half of the up cycle the perm business has frequently accelerated to maybe closer to twice the growth rate of the temp."

Readers can see in the chart above that Robert Half's U.S. permanent staffing segment revenue grew at 21% in the fourth quarter, compared to 14% growth for U.S. temporary and consultant staffing -- so not quite at the multiple suggested by Bisbee. However, Messmer gave some positive commentary in his reply:

Well, because perm falls more in a downturn it accelerates more than an up cycle. I would say the last several quarters perm is feeling pretty classic, relative to history. Candidates are getting tighter, candidates are getting multiple offers.

Messmer added that he would invest "disproportionately in headcount in perm" in order to service the expected growth.

He also discussed the existence of skill shortages in accounting and information technology -- two areas of strength for Robert Half. The following chart shows the company's breakout of revenue. Accountemps, Robert Half Technology, and Robert Half Finance & Accounting accounted for more than 55% of Robert Half's revenue in 2015.

Source: Robert Half International presentations.

All told, Robert Half delivered a solid set of results, and provided the employment market grows in line with management expectations, the company could be set for a good year in 2015.

Lee Samaha has no position in any stocks mentioned. The Motley Fool recommends Robert Half International. Try any of our Foolish newsletter services free for 30 days. 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.

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

Robert Half International Inc. Stock Quote
Robert Half International Inc.
$82.32 (1.43%) $1.16

*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 08/13/2022.

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.