ManpowerGroup Inc.(MAN) posted better-than-expected second-quarter 2014 results. Earnings per share came in at $1.35 cents, which handily beat the Zacks Consensus Estimate of $1.32 and increased 28.6% from $1.05 delivered in the prior year quarter.

Manpower Inc - Earnings Surprise | FindTheBest

Consistent strong performances across most of the major regions, along with effective cost management were the primary growth drivers. Favorable currency fluctuations also contributed to earnings.

However, sluggishness in the overall sector and a slowly recovering French economy had investors’ worried, which was reflected in a 3.2% decline in Manpower’s stock price yesterday.

Revenues & Margins

Total revenue rose 5.6% (up 3.7% in constant currency) year over year to $5,321.7 million, based on robust regional performances partly run down by weaker-than-expected performance in France. Moreover, reported revenues came ahead of the Zacks Consensus Estimate of $5,319.0 million.

Gross profit increased 7.3% (up 5.6% in constant currency) to $897.3 million due to higher revenues, partly offset by a rise in cost of services. Gross margin expanded nearly 30 basis points (bps) to 16.9%.

ManpowerGroup posted operating profit of $187.4 million, up 46.3% (up 43.2% in constant currency) from the prior-year quarter.

Selling and administrative expenses were up 0.2% (down 1.2% on constant currency) to $709.9 million.

Operating Groups

By geographic segments, revenues from the United States grew 3.7% year over year to $775.9 million. The segment’s operating profit decreased 2.9% to $29.7 million from the prior-year quarter.

In Other Americas, revenues decreased 3.1% (but grew 7.7% in constant currency) to $375.2 million while the segment’s operating profit rose 18.3% (up 29.2% in constant currency) to $14.0 million.

In France, revenues rose 6.9% year over year (up 1.9% in constant currency) to $1,412.1 million while the segment’s operating profit increased 75.9% (up 67.9% in constant currency) to $71.9 million.

In Italy, revenues increased 12.8% year over year (up 7.5% in constant currency) to $313.9 million. The segment’s operating profit rose 24.9% (up 19.1% in constant currency) to $18.3 million.

In Other Southern Europe, revenues increased 19.7% (up 14.9% in constant currency) to $243.0 million from the year-ago quarter. The segment’s operating profit rose substantially to $5.7 million from $1.2 million reported in the year-ago quarter.

In Northern Europe, revenues rose 9.2% (up 4.6% in constant currency) to $1,527.8 million while operating profit increased 39.3% (up 34.4% in constant currency) to $46.2 million, both on a year-over-year basis.

In APME (Asia Pacific Middle East), revenues came in at $594.0 million, down 4.7% (down 1.8% in constant currency) year over year. The segment’s operating profit came in at $21.0 million, up 2.9% (up 5.9% in constant currency) from the prior-year quarter.

Revenues from Right Management decreased 1.4% (down 2.7% in constant currency) year over year to $79.8 million. The company posted operating income of $12.7 million, up 72.3% (up 72.4% in constant currency) from the year-ago quarter.

Other Financial Details

ManpowerGroup, which competes with Korn/Ferry International (KFY), ended the quarter with cash and cash equivalents of $638.5 million, total debt of $529.0 million, which reflected a debt-to-capitalization ratio of 15.0% and shareholders’ equity of $3,082.4 million.

Moreover, ManpowerGroup incurred a capital expenditure of $21 million during the first half of the year while generated negative free cash flow came of $37 million. For the first half, Manpower bought $17 million worth of shares and paid $39 million as dividends.

Guidance

ManpowerGroup now expects third-quarter 2014 earnings per share in the range of $1.46 to $1.54. The Zacks Consensus Estimate for third-quarter 2014 stands at $1.49.

Moreover, for the third quarter, Manpower expects revenues to be up 5%—7% (up 4%—6% in constant currency). Gross margin is expected to be weaker than the second quarter on account of seasonal factors.

Operating margin is expected to be up 50 bps and in the range of 3.7%—3.9%.

Currently, Manpower carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same sector include CTPartners Executive Search Inc. (CTP), and AMN Healthcare Services Inc. (AHS). While CTPartners sports a Zacks Rank #1 (Strong Buy), AMN Healthcare Services has a Zacks Rank #2 (Buy).

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