Manpower to Outperform - Analyst Blog

We recently upgraded our recommendation on Manpower Inc. (MAN) to Outperform with a price target of $60.00 per share. Earlier we had a Neutral rating on the stock.

The company's brand value and strong global network provide a competitive advantage and reinforces its dominant position in the market. Manpower leverages a strong network of about 4,000 offices in 82 countries and serves approximately 400,000 clients.

Manpower benefits from growth prospects in under-penetrated staffing markets of Italy, Germany and the Nordic region, and has significant operations in high-growth emerging markets of India, China and Eastern Europe. Consequently, the company has strong upside potential.

Manpower recently posted third-quarter 2010 results that topped the Zacks Consensus Estimate on the heels of revenue growth across all geographies due to improvement in the job market for temporary workers. The company indicated that the U.S., Germany and the U.K. witnessed healthy revenue growth. Despite the recent economic downturn and unemployment rate hovering around approximately 10%, the company's U.S. operations have registered revenue growth.

The quarterly earnings of 62 cents a share outpaced the Zacks Consensus Estimate of 47 cents and rose substantially from 23 cents earned in the prior-year quarter. Riding on the back of robust results, Manpower now expects fourth-quarter 2010 earnings in the range of 54 cents to 62 cents a share.

A positive sentiment is palpable among the analysts covering the stock, following higher-than-expected third-quarter 2010 results and strong staffing fundamentals. We witness a rise in the Zacks Consensus Estimates buoyed by an increase in demand for temporary labor globally with an improved cost structure.

In the last 30 days, the current Zacks Consensus Estimate for fourth-quarter 2010 rose 9 cents to 60 cents a share, and for first-quarter 2011 it increased by a cent to 33 cents. For fiscal 2010, the Estimate has climbed 21 cents to $1.64, and for fiscal 2011, the Estimate jumped 18 cents to $2.73, in the last 30 days.

Given the strong fundamentals we expect Manpower to Outperform. Moreover, the Zacks #1 Rank, which translates into a short-term Strong Buy rating, correlates with our long-term recommendation.