Employment powerhouse Manpower (NYSE:MAN) turns in its numbers for Q2 2006 tomorrow. And after seeing the Labor Department's lackluster employment report for the month of June, investors are understandably nervous about what tomorrow's news may contain.

What analysts say:

  • Buy, sell, or waffle? Wall Street isn't worried, however. Of the 16 analysts following the company, 10 think you should buy the stock. The other six rate Manpower a hold.
  • Revenues. Wall Street is looking for 6% sales growth tomorrow, to $4.3 billion.
  • Earnings. Profits are predicted to surge 14%, to $0.80 per share.

What management says:
 Recent news from Manpower lends support to both sides of the question. On the bullish analysts' side, Manpower reported strength in its French operations in early 2006, predicting 9% or better sales growth for that division. On the skittish investors' side, the same press release announced that the president of the company's French unit had departed Manpower and been replaced, albeit on an interim basis, by a new head who has been with the company barely one year. Neither the departure, nor the replacement, sound like good news to this Fool -- especially when you consider that France is Manpower's second-largest revenue generator, and its most profitable business unit.

What management does:
Thus far, Manpower's business has been doing pretty well. Gross margins have softened over the past few quarters, but operating and net margins are holding up nicely, and even growing a bit. As revenues grew modestly (up about 3% in the last six-month period), the cost of providing services has tracked revenue growth exactly (also up 3%), while operating costs have been kept flat year over year.

Margins %

12/04

3/05

6/05

9/05

12/05

3/06

Gross

18.7

18.6

18.5

18.4

18.3

18.4

Op.

2.7

2.6

2.6

2.6

2.8

2.8

Net

1.6

1.6

1.6

1.5

1.6

1.7
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:
In the past 52 weeks, Manpower shares have trounced the performance of the broader S&P 500 by a 43%-to-1% margin. Meanwhile, we've seen repeated evidence that the Fed intends to kill the booming U.S. housing market and the housing-related jobs it supports, and perhaps seriously injure the U.S. economy in the process. Add to that the June report of weaker-than-expected job growth, and the company-specific turmoil now affecting Manpower's business in France, and I suspect that now is not the time for investors to get greedy over recent weakness in Manpower's share price.

Tomorrow's news may prove me wrong. But even if it does, I suspect my mistake will have been in worrying about Manpower too early -- not too unnecessarily.

Competitors

  • Accenture (NYSE:ACN)
  • BearingPoint (NYSE:BE)
  • Kelly (NASDAQ:KELYA)
  • Kforce (NASDAQ:KFRC)
  • Spherion (NYSE:SFN)

To contrast the business models of Manpower and rival Korn/Ferry (NYSE:KFY), read Ryan Fuhrmann's recent column: "Korn/Ferry Aces the Interview."

Accenture is a Motley Fool Inside Value pick. For more of the market's best bargains from Fool value guru Philip Durell, try Inside Value free for 30 days.

Fool contributor Rich Smith does not own shares of any company named above.