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The Zacks Analyst Blog Highlights:ManpowerGroup, Kelly Services, Robert Half International, Washington Federal and Sterling Financial

CHICAGO, Nov. 2, 2012 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include ManpowerGroup (NYSE:MAN), Kelly Services Inc. (Nasdaq:KELYA), Robert Half International Inc. (NYSE:RHI), Washington Federal Inc. (Nasdaq:WAFD) and Sterling Financial Corporation (Nasdaq:STSA).

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Here are highlights from Thursday's Analyst Blog:

Earnings Scorecard: Manpower

ManpowerGroup (NYSE:MAN), the global leader in the employment services industry, posted third-quarter 2012 results on October 19, 2012. Here we will discuss the company's scorecard, based on the recent earnings announcement, subsequent estimate revisions by analysts as well as the Zacks Rank and long-term recommendation for the stock.

Last Quarter Synopsis

ManpowerGroup delivered better-than-expected third-quarter 2012 results on the back of increased gross margin and effective cost management. The quarterly earnings of 79 cents a share surpassed the Zacks Consensus Estimate of 68 cents.

However, earnings per share dropped 18.6% year-over-year as the current sluggish macroeconomic environment resulted in soft demand for recruitment services, particularly in Europe, and weighed upon its results. Strong dollar also acted as a deterrent.

Milwaukee, Wisconsin based Manpower's total revenue waned 10.5% to $5,172.3 million but came ahead of the Zacks Consensus Estimate of $5,106 million.

The company now expects fourth quarter earnings between 72 cents and 80 cents a share, reflecting an estimated year-over-year decline of 26.5% to 18.4%, respectively. Management now projects total revenue for the quarter to decline between 5% and 7% in the U.S. dollars, or in the band of 3% to 5% in constant currency from the prior-year quarter.

(Read our full coverage on this earnings report: Manpower Beats, Profit Dips)

Agreement of Estimate Revisions

The agreement of estimate revisions indicates that the analysts were not unidirectional, following Manpower's third-quarter 2012 results.

In the last 30 days, 7 out of 13 analysts covering the stock raised their estimates, whereas 2 analysts lowered the same for the fourth quarter of 2012. For the first quarter of 2013, 4 analysts trimmed their estimates, whereas 2 analysts made upward revisions.      

For fiscal 2012, 11 analysts revised their estimates upward, and only 1 analyst lowered the same in the last 30 days. For fiscal 2013, 6 analysts increased their estimates and 5 analysts made downward revisions.

What Drives Estimate Revision

Manpower's better-than-expected top and bottom line performances instilled confidence among the analysts who went on to revise their estimates upwards. Further bolstering their bullish attitude was that the quarterly earnings per share, which also came ahead of management's previous provided guidance range of 64 cents to 72 cents per share.

Moreover, the analysts' sentiments were uplifted, as the company is now contemplating on exiting lower margin business and venturing into high margin business. The company is also focusing on controlling its expenses. On the other hand, the ManpowerGroup Solutions business sustained its growth momentum. The demand for the countercyclical outplacement services is also portraying signs of steadiness, which rose 18% during the quarter.

Despite these, some analysts remain bearish on the stock and lowered their estimates on account of an 18.6% earnings per share decline in the third quarter and a dismal fourth quarter outlook. Moreover, analysts remained on the back foot as the rate of decline in total revenue accelerated sequentially. After falling 8.1% year over year in the second quarter of 2012, total revenue dropped 10.5% during the third quarter. In constant currency too, the rate of decline increased to 3.8% in the quarter under review from 0.8% in the previous quarter.

However to be noted, that the rate of decline in the top line projected by management for the fourth quarter, decelerated from the third quarter, thereby giving analysts an opportunity to raise their estimates.

Magnitude of Estimate Revisions

The magnitude of estimate revisions by the analysts is clearly reflected through changes in the Zacks Consensus Estimates.      

The Zacks Consensus Estimate for the fourth quarter of 2012 has moved up by 6 cents to 77 cents a share in the last 30 days. The Zacks Consensus Estimate for the first quarter of 2013 dropped by 3 cents to 41 cents a share.

For fiscal 2012, the Zacks Consensus Estimate jumped 14 cents to $2.81 in the last 30 days. Over the same time frame, the Zacks Consensus Estimate for fiscal 2013 slid by a penny to $2.92.

Closing Comment

Manpower's comprehensive range of services makes the company a true global staffing firm. The company's brand value and strong global network provides it with a competitive advantage and reinforces its dominant position in the market. However, what compels us to have a cautious view on the stock is the company's dwindling top and bottom line performances as well as soft projections of the same for the fourth quarter.

Currently, we maintain our "Neutral" recommendation on the stock. Moreover, Manpower, which competes with Kelly Services Inc. (Nasdaq:KELYA) and Robert Half International Inc. (NYSE:RHI), holds a Zacks #3 Rank that translates into a short-term "Hold" rating.

Wash Federal Acquires South Valley

Recently, Washington Federal Inc. (Nasdaq:WAFD) announced the completion of the acquisition of Oregon-based South Valley Bancorp Inc. Per the deal, with the amalgamation of both the parent companies, South Valley's wholly-owned subsidiary – South Valley Bank & Trust – will also merge with Washington Federal's wholly-owned subsidiary – Washington Federal.

Washington Federal further stated that the combined company will have 190 offices in 8 western states. Furthermore, the combined company will have access to a bigger branch network, higher liquidity and increased lending capacity, which will propel its profitability going forward.

The acquisition will add roughly $514 million loans and $743 million deposits to Washington Federal's financials. It will also strengthen the company's foothold in southern and central Oregon, which in turn will drive its banking and commercial real estate businesses.

Washington Federal has always been inclined towards mergers and acquisitions due to its capital strength. In 2011, the company acquired Albuquerque, New Mexico-based Charter Bank and Phoenix, Arizona-based failed Western National Bank.

In 2010, Washington Federal acquired all of the deposits of Horizon Bank of Bellingham, Washington. Also, the company acquired First Mutual Bancshares Inc. and First Federal Banc of the Southwest Inc. in 2008 and 2007, respectively.

These mergers and acquisitions have helped Washington Federal increase its assets, workforce and branch network, which in turn has strengthened its market share substantially. We expect the company to maintain this growth strategy.

Currently, Washington Federal retains a Zacks #3 Rank, which translates into a short-term Hold rating. Among its peers, Sterling Financial Corporation (Nasdaq:STSA) also retains a Zacks #3 Rank.

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