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Robert Half (RHI) Rides on Robust Job Market, Lower Tax Rate


Robert Half InternationalInc. RHI stock has rallied 30.3% year to date, significantly outperforming the 9.4% rise of the industry it belongs to.

The company reported strong second-quarter 2018 results with earnings and revenues surpassing the Zacks Consensus Estimate. Earnings per share of 89 cents beat the consensus mark by 4 cents and increased 39.1% year over year. Total revenues of $1.46 billion outpaced the consensus mark by $29.5 million. The top line increased 11.4% year over year on a reported basis and 9.6% on an adjusted basis.

In the past 60 days, the Zacks Consensus Estimate has been revised 3.4% and 2.4% upward for third-quarter and full-year 2018, respectively. The company has an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in three of the previous four quarters, delivering an average positive earnings surprise of 4%.

What’s Driving Robert Half?

The U.S. staffing industry is currently benefiting from promising developments in the broader economy. The labor market has been witnessing record low unemployment levels and strong job additions since the beginning of the year. While the economy continues to create new jobs despite the 18-year low jobless rate, a tight labor market is compelling companies to pay higher to attract and retain employees.

Trump administration’s business-friendly approach, including tax cuts and higher government spending, are acting as major growth catalysts for the overall economy, which in turn inspires optimism about growth of the staffing industry. All these factors seem to be working in favor of Robert Half, which saw its U.S. staffing revenues increase 6.7% year over year on a reported basis and 6.4% on an adjusted basis in second-quarter 2018.

Lower tax rates as a result of the new tax law (Tax Cuts and Jobs Act, effective since Dec 22, 2017) are contributing to Robert Half’s bottom line. For 2018, the effective tax rate is expected in the range of 25-26%. Reduced taxes will likely lead to greater retention of profits, which will help the company allocate more funds toward corporate reformation and development efforts.

Additionally, the company’s international revenues are in good shape. Robert Half’s non-U.S. staffing revenues increased 22.4% on a reported basis and 17% on an adjusted basis in second-quarter 2018. The same for Proviti surged 51.9% on a reported basis and 25.5% on an adjusted basis.

We are also impressed by Robert Half’s endeavors to reward its shareholders with dividend payments and share repurchases. In second-quarter 2018, the company bought back 1.1 million shares for $76 million. The company had 10.1 million shares available for repurchase under its repurchase plan as approved by the board of directors. The company also paid a cash dividend of 28 cents per share in June, which adds up to a total payment of $34 million. Such moves indicate the company’s commitment to create value for shareholders and underline its confidence in its business.

Zacks Rank & Stocks to Consider

Currently, Robert Half carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some other top-ranked stocks in the broader Business Services sector include Heidrick & Struggles International HSII, BG Staffing BGSF and Insperity NSP. While Heidrick & Struggles International sports a Zacks Rank #1, BG Staffing and Insperity carry a Zacks Rank #2.

The long-term expected EPS (three to five years) growth rate for Heidrick & Struggles International, BG Staffing and Insperity is 13.5%, 20% and 18%, respectively.

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