Can Robert Half (RHI) Spring A Surprise In Q2 Earnings?

Robert Half International, Inc. (NYSE:RHI) is set to report second-quarter 2017 results after the market closes on Jul 25. The question lingering in investors’ minds is, whether this global staffing firm will be able to post a positive earnings surprise in the to-be-reported quarter. The company posted an average earnings surprise of 0.23% in the trailing four quarters.

A glimpse of Robert Half’s stock performance shows that its shares have been underperforming the Zacks categorized Staffing Firms industry and the broader Business Services sector for the last six months. The stock dipped 0.4% against the above mentioned industry’s growth of 10.8% and sector’s improvement of 8.7%. Notably, the industry is part of the top 18% of the Zacks Classified industries (49 out of the 256), while the broader sector is placed at bottom 25% of the Zacks Classified sectors (12 out of 16).

Let us see how things are shaping up for this announcement.

Which Way are Estimates Treading?

Let’s look at the estimate revisions in order to get a clear picture of what analysts are thinking about the company right before earnings release. The Zacks Consensus Estimate for second-quarter and 2017 has been stable over the last 30 days. However, the Zacks Consensus Estimate of 65 cents per share for the second quarter and $2.66 per share for 2017 reflects a year-over-year decrease of 7.9% and 0.2%, respectively. Further, analysts polled by Zacks expect revenues of $1.31 billion for the said quarter, down 2.4% from the year-ago period. For 2017, analysts polled by Zacks expect revenues of $5.22 billion, down 0.6% year over year.

What Does the Zacks Model Unveil?

Our proven model does not conclusively show that Robert Halfis likely to beat earnings estimates this quarter. This is because a stock needs to have both a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESPfor this to happen. You may uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Robert Half has an Earnings ESP of 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 65 cents. Although the company’s Zacks Rank #3 increases the predictive power of ESP, we need a positive Earnings ESP in order to be confident about an earnings surprise.

Factors Influencing the Quarter

Robert Half is the world's largest specialized provider of temporary and permanent personnel in the fields of accounting and finance. Robert Half's total revenue has been improving on the back of higher demand for its professional staffing and consulting services. The company’s international operations also improved due to higher demand for staffing and consulting services.

Moreover, Protiviti is also adding to the year-over-year revenue gains, which seem to be quite encouraging. Further, Protiviti has an impressive growth outlook due to a robust regulatory environment as well as increased need for stronger internal controls and data security measures.

However, lower margins, currency fluctuations and rising health care costs remain the major concerns for Robert Half. In fact, lower margins, especially at Protiviti, are expected to take a toll on Robert Half’s profits.

We note that the company’s sales have missed the Zacks Consensus Estimate in seven of the last nine quarters due to a decline in the U.S. staffing revenues. Currency headwinds are also denting sales.

Nevertheless, Robert Half remains confident of performing well given the solid labor market and stable economic landscape. Also, it expects reduction in the hiring cycle and in turn boosting the company’s profitability. Further, Protiviti is enhancing its practice areas owing to digital expansion and data security measures.

Robert Half issued its earnings and sales guidance for second-quarter 2017. The company expects revenues in the range of $1.275–$1.335 billion for the said quarter. In addition, it expects earnings in the range of 61–67 cents per share.

Stocks Poised to Beat Estimates

Stocks in the business services sector that have both a positive Earnings ESP and a favorable Zacks Rank, and are therefore worth considering include:

S&P Global Inc. (NYSE:SPGI) with an Earnings ESP of +2.58% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

ManpowerGroup (NYSE:MAN) with an Earnings ESP of +1.16% and a Zacks Rank #2.

Waste Management, Inc. (NYSE:WM) with an Earnings ESP of +1.22% and a Zacks Rank #2.

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