Balanced View on Robert Half - Analysis
The staffing firm reported its fourth-quarter 2013 results on Jan 31. Robert Half delivered fourth quarter 2013 earnings of 49 cents per share, beating the Zacks Consensus Estimate by a penny and the prior-year quarter adjusted earnings by 16.7%. Despite sluggish performance in the international markets, Robert Half witnessed strong year-over-year earnings growth driven by solid demand for services by skilled professionals in the U.S. In fact, the company's earnings have now grown in double-digits for 15 straight quarters on a year over year basis, driven by growing demand for skilled workforce and consulting services.
Robert Half's total revenue grew 4.8% year over year to $1.08 billion in the fourth quarter and beat the Zacks Consensus Estimate by 0.8%. On a constant currency basis, revenues increased 3% year over year, driven by 6% growth in the U.S., which was offset by a 3% decline in international staffing revenues in the fourth quarter. Higher sales, mainly driven by Protiviti operations, also boosted the company's operating margin.
Protiviti is one of the key drivers of revenue and operating performance at Robert Half. It helps companies solve problems in finance, technology, operations, governance, risk and internal audit. The strong Protiviti performance has added to year-over-year growth rates of U.S. staffing revenues and to global operating income in 2013.
We are impressed that Robert Half's revenues have been growing since the past three years. The rising staffing needs of the company's clients and a gradual improvement in economic conditions and job markets in the U.S. led to a rise in the demand for temporary workers as a percentage of total U.S. employment. The U.S. health care reform and consumer protection regulations are also fueling the demand for the company's services.
According to Robert Half, the demand for skilled professionals at small and midsized businesses will increase in 2014, as these companies do not have a human resource department of their own and as a result opt for Robert Half's personalized and consultative approach. The company also expects a rising need for skilled finance and information technology talent in the regulatory and compliance space.
While the company performed well in the U.S. in 2013, sales growth rates outside the U.S have declined, impacted by weaker economies in several countries, most notably in Europe. The ongoing debt crisis in Europe has hurt demand for recruitment services internationally. Though the company believes that its non-U.S. staffing operations are well positioned to benefit in a stronger economic climate in 2014, we remain skeptical till the time positive results are achieved. The company's permanent placement services are also witnessing soft growth for the last few quarters, which is a concern. Robert Half holds a Zacks Rank #3 (Hold).