Shares of Robert Half International Inc. RHI gained 4.4% in after-hours trading yesterday. The upside was in response to the better-than-expected first-quarter 2018 results.

In the quarter under review, adjusted earnings of 80 cents per share surpassed the Zacks Consensus Estimate by 7 cents. The bottom line also exceeded the guided range of 70-76 cents and improved 29% year over year.

Total revenues of $1,395 million outpaced the consensus mark by $38 million. The top line also increased 8% year over year on a reported basis and 7% on a same day in constant currency. Notably, revenues came at the higher end of the $1,335-$1,395 million guided range.

Quarterly results were driven by revenue growth across U.S. as well as non-U.S. staffing and Protiviti operations, particularly in the permanent placement division. Broadly, Robert Half seems to benefiting from a growing global economy, low unemployment rates in professional occupations and continued small business optimism.

On the conference call, management stated that the company continues to invest in digital innovation initiatives aimed at integrating its traditional professional staffing services with customers digital experience.

We observe that Robert Half’s shares have gained 21.4% in the past year, outperforming the 16.3% rally of the industry it belongs to.

Let’s delve deeper in to the numbers

Soild Segmental Performance

Based on the nature of services, Robert Half has three reportable operating segments namely, Temporary and Consultant Staffing, Permanent Placement Staffing and Risk Consulting and Internal Audit Services. While revenues from Temporary and Consultant Staffing and Permanent Placement Staffing come under the global staffing division, the same from Risk Consulting and Internal Audit Services are reported under the Protiviti division.

Global Staffing Division: Global Staffing revenues rose 7% to approximately $1,188 million on a constant-currency basis. Constant-currency international revenues increased 16% to $293 million, whereas U.S. revenues were up 5% from the prior-year quarter to $895 million. Notably, currency had a positive impact of about 2.6% on reported staffing revenue growth. First-quarter 2018 had 63 billing days compared with 63.4 billing days in first-quarter 2017. At present, Robert Halfhas 326 staffing locations with 86 locations situated in 17 countries outside the United States.

Protiviti: Protiviti revenues were $207 million, which improved 5% year over year on a constant-currency basis, with strength across both the U.S. and non-U.S. regions. While U.S. revenues at the segment grew 1% to $167 million, the same from international regions surged 22% to $40 million on a constant-currency basis. Currency boosted overall revenue growth at the segment by 1.9%. Currently, Protiviti along with its independently-owned Member Firms has a network of 76 locations across 26 countries.

Robert Half International Inc. Revenue (TTM)

Operating Performance

Gross profit in the first quarter came in at $572.4 million, which grew 8.9% year over year. Gross margin expanded by 20 basis points (bps) to 41%, mainly owing to higher staffing margins.

While staffing gross margin expanded 30 bps year over year to 43.6%, Protiviti gross margin contracted 60 bps to 26.4%.

Robert Half reported operating income of $134.6 million compared with the year-ago period figure of $125.5 million.

At the staffing division, operating margin contracted 20 bps to 9.6% while operating income was $119 million, up 10% from the year-ago quarter. At Protiviti, operating margin was 10.0% while operating income came in at $15 million, down 10% from the prior year. Protiviti produced an operating margin of 7.4%.

Balance Sheet

Robert Half ended the quarter with cash and cash equivalents of $292 million compared with $294.8 million at the end of the previous quarter. Cash flow from operations was $116 million and capital expenditures were $8 million.

In the quarter under review, Robert Half bought back 1.1 million shares for $60 million. There are 11.3 million shares available for buyback under the stock repurchase program. This includes the additional 10 million shares that the company’s board has recently authorized for repurchase.

Robert Half’s board also authorized increase of 4 cents to the company’s quarterly cash dividend bringing it to 28 cents. In March 2018, it paid the dividend for a total cash outlay of $35 million.

Q2 Forecast

Robert Half expects second-quarter 2018 revenues in the range of $1.40-$1.46 billion, higher than the Zacks Consensus Estimate of $1.38 billion.

Earnings are anticipated in the band of 81-87 cents per share, the midpoint of which is higher the Zacks Consensus Estimate of 81 cents. Encouragingly, the mid-point of these projections reflects year-over-year top-line (constant currency) and bottom-line growth of 7% and 31%, respectively.

Zacks Rank and Stocks to Consider

Robert Half carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader Business Services sector include Mastercard (MA), The Brink’s Company (BCO) and FLEETCOR Technologies (FLT), each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term earnings per share growth rate for Mastercard, The Brink’s Company and FLEETCOR is projected to be 18.7%, 20.6% and 16.5%, respectively.

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