Manpower MAN 2010 Q1 Earnings

Manpower recently reported 2010 Q1 earnings.

Manpower beat the estimates as an analyst from S&P raised their estimates. While Manpower lowered their estimates for the next quarter to set the bar lower ahead of it's acquisition of COMSYS.

The problem with the the increase is primarily the continued weak profitability in Manpower's numbers.

Operating margins in all regions experienced flat to slightly negative operating margins.

With the increase in revenue growth all MAN managed was sub two million in profits. If there is any downturn, and a majority of the analysts have not priced in what a Greece, and PIIGS default would cause to Manpower's underlying business with a bulk of their revenue coming from the European nations. Out of all the majorly traded staffing firms on the NYSE, MAN has the most underlying risk with such a sizable stake of it's business from Europe.

France has a large stake of its bonds in Greece, with over 700+ billion. If Greece were to continue to find itself in limbo, France may find it's own economic growth in jeopardy.

Small businesses don't see recovery panning out

NFIB index dipped from 88 to 86, and has been below the 90 level for 18 consective months.

"According to the NFIB's latest survey, most owners think business conditions will not improve in the next six months, few are hiring, and fewer than usual are investing in their business. "

Source: http://www.nfib.com/tabid/565/Default.aspx?cmsid=51254

TriNet Human Capital Index Employment Unemployment

TriNet released their latest monthly reading regarding employment today. Even as their are readings of green shoots in the economy, TriNet survey speaks otherwise. Their latest reading points to flat employment, rather than growth.

Source: TriNet

Innovative small technology and service companies slowed hiring against
broader U.S. averages during March, and while layoffs rose slightly, they
remained well below last year´s highs. Net employment growth appeared flat in
March, which may indicate that companies are waiting for signals about the
broader business climate.

Underemployment Rises to 20.3% in March 2010

The trend of the underemployed has risen to 20.3% from 19.8% (February).

http://www.gallup.com/poll/127091/Underemployment-Rises-March.aspx

Although, employment has slightly ticked up, the US continues to experience a structural change in employment. These structural changes take years to right its ship.

An environment of higher dollar, increased regulation, and health care costs, and taxes usually do not fuel a booming economy. Time will tell if the economy can continue to make gains.

Source: Gallup

Unemployment Rises in 27 States, Drops in 7 States February 2010

Twenty-seven states recorded over-the-month unemployment rate increases, 7 states and the District of Columbia registered rate decreases, and 16 states had no rate change, the U.S. Bureau of Labor Statistics reported today.

Over the year, jobless rates increased in 46 states and the District of Columbia
and declined in 4 states. The national unemployment rate in February, 9.7
percent,remained unchanged from January, but was up from 8.2 percent a year
earlier.

Mish had an interesting piece on the unemployment picture in the US. Although, the employment picture has mildly risen from the bottom, unemployment continues to remain at elavated levels.

Source: Mish Economic

Manpower (MAN) Staffing Updated Valuations March 2010

After pouring over some of the recent competitors and Manpower's latest earnings. Some of the metrics has changed, and some metrics still remain fairly cautious sign of the state of affairs with Manpower.

As Manpower has increased their earnings, valuations have come down. However risks are abound.

I'll provide some near term pros and cons of the stock, please do your own research, as this is not a recommend for the purchase or sale of the securities. I'm only providing my own research.

+ Near term improve in debt. Debt levels has narrowed to 757 Mil.
+ The pending acquisition of IT provider Comsys.

While there are some positive catalyst in places, risk still remains.

-While I am positive on the acquisition of Comsys, Manpower's ability to generate return on invested capital has been very limited. Manpower's return on invested capital is 0.92.
- Weak staffing levels in Europe, with risks associated with the Euro and the debt crisis which risks growth in the European Union. This remains a wild card as analysts from what I've read have not priced the risk of a currency implosion by the Euro. With the IMF, and non bipartisan support through the EU, Manpower's largest industrial partners France and Germany will be somehow affected longer term by the turmoil within the PIIGS. Risks either due to spending cuts, reduced spending by consumers, and increased debt obligations by specific countries.
- Continued pressure on valuations near term with MAN trading at 82.6x earnings, while the S&P500 trades at 11.7, historically MAN trades at a historical p/e of 29.0.
- PEG continues to trade well over one, and has risen back to 5.51.

Two worrisome metrics that continue to place MAN at risk, as business continue to face hurdles:
Historic trends of MAN receiving payment are at elevated levels:

- Days Sales Outstanding

Year

2000 67.2
2001 69.9
2002 71.1
2003 72.3
2004 71.4
2005 73.0
2006 73.2
2007 74.0
2008 68.7
TTM 83.8

- Days Inventory Payable Period

Year 2000 17.4
2001 17.9
2002 17.4
2003 18.2
2004 18.7
2005 19.1
2006 19.9
2007 20.9
2008 20.1
TTM 28.8

As stated there continues to be risk as MAN is having difficulty collecting payment compared to historic levels. I continue to be cautious as Manpower continues to face hurdles within its largest market (France), and pressure with labour regulations and unions in Europe.

The increasingly likely bailout of Greece, and possibly Portugal will have ramifications throughout the EU. The EU has historically been one of the slower growth areas in the global arena. With these spending and debt restructuring Manpower faces increased challenges, even as the global economy bounces from the bottom.

US Small-Business Optimism Falls FEB 2010

Small-business owners in the U.S. turned slightly more pessimistic in February, although employment readings--from the U.S.'s main source of new jobs--grew a shade more positive.

The Small Business Optimism Index lost 1.3 points to 88.0 last month, reported the National Federation of Independent Business in a press release Tuesday.

The NFIB noted that only two of 10 components posted gains last month.

The subindex covering expected business conditions dropped 10 points to a -9 reading, and sales expectations dropped 3 points to zero.

The NFIB said that owners complained "poor sales" was their top problem.

Source: Dow Jones Newswires