Zacks Industry Outlook Highlights: Robert Half International, Insperity and Kforce
For Immediate Release
Chicago, IL – October 21, 2020 – Today, Zacks Equity Research discusses Staffing, including Robert Half International Inc. RHI, Insperity, Inc. NSP and Kforce Inc. KFRC.
Link: https://www.zacks.com/commentary/1078737/3-stocks-from-the-promising-staffing-space-to-watch-out-for
Coronavirus-induced strict lockdowns and market uncertainties have led to an abrupt shift in recruitment patterns within the staffing industry. A solid transition has been noticed from a candidate-driven market to a job-oriented market. Staffing companies are also finding new opportunities with digitization of the workforce. The remote working model is leading to cost savings for industry payers by bringing down their spending on real estate and reduction of business travel. These factors bode well for companies in the Zacks Staffing industry.
Robert Half International, Insperity and Kforce are some stocks, which are likely to gain from the abovementioned industry trends. However, job loss concerns amid market uncertainties persist.
Industry Description
The Zacks Staffing industry comprises companies that offer a wide range of services related to human resources and workforce solutions. These include employment screening, recruitment (both for temporary staffing and long-term placements), retirement solutions, human capital management, payroll management, performance management, organizational planning, financial and expense management.
4 Trends Shaping the Future of Staffing Industry
A Healthy Demand Environment: The industry has been witnessing growth in cash flow over the past few years, which has enabled most players to pay out stable dividends and repurchase shares. Going forward, the economy is likely to recover, backed by upbeat manufacturing and non-manufacturing activities. This should aid the industry with additional hiring and wage increases.
Transitions Within the Industry: The pandemic has led to an abrupt shift in recruitment patterns within the staffing industry. While coronavirus-induced lockdowns have resulted in unproductive units in several industries, prompting companies (especially in the aviation, travel & tourism, hospitality, manufacturing, automotive, media, and entertainment sectors) to reduce their temporary staff, there has been a spike in hiring for essential services like e-commerce, logistics (package/freight delivery, hyper-local delivery), healthcare and information technology.
Additionally, a number of temporary employees are also being employed across retail, co-operative and agricultural operations, including the distribution of food, milk, groceries, vegetables, under different job roles ranging from delivery boys, supervisors, drivers, customer care. Other essential services involve workers engaged in manufacturing and distribution of PPEs, and employees in banks, ATMs, telecom and Internet services.
Meanwhile, hospitals and various health care centers are facing staff shortages as coronavirus cases continue to rise. This is because reduction in salaries, late payments and fear of infection (amid poor working conditions) are discouraging qualified professionals from applying for vacancies. Also, small hospitals and healthcare facilities, which were closed for undefined time span during the initial phases of lockdown, cut down staff due to reduced revenues and uncertainty. This led to a shortage of personnel when they reopened. The aforementioned factors have resulted inan overburdened healthcare workforce.
A solid transition has been noticed from a candidate-driven market (where applicants would apply for or choose the roles based on their respective educational background and skills) to a job-oriented market (where applicants are required to adapt themselves with the available open positions).
Work-from-Home Wave Increases Technology Adoption: The industry has witnessed a shift in its operating model with an increase in the number of remote workers. Recruiters are opting for online communication tools to conduct interviews online. As a result, technology-based recruiting techniques like social media, mobile technology, artificial intelligence and Big Data are in demand. Also, technologies like cloud and blockchain offer more storage and safety to HR data. These trends should keep demand for staffing services in good shape.
Video conferencing tools such as Google Meet, Zoom, Skype and Microsoft Teams are being used to communicate with clients, conduct interviews and meetings, manage staffs virtually, remote training and remote surveillance.
Staffing companies are also finding new opportunities with digitization of the workforce and demand for software-as-a-service (SaaS) solutions to meet new challenges in the current scenario.
Remote working model is leading to cost savings for many firms by bringing down their spending on real estate and reduction of business travel.
Job Loss Concerns and Remedies: The pandemic has dealt a blow to the global staffing industry as temporary workers were the first to be laid-off by companies to put a check on operating costs and expenses amid market uncertainties. As a preventive measure for temporary workers’ job security, companies are being asked to halt wage hikes for the next 12 months and slash bonuses.
Further, employees continue to struggle to piece together the balance between home and work life in a work-from-home scenario amid lockdowns. The fear of losing jobs amid the challenging scenario is pushing employees to work for longer hours, meeting deadlines, and keeping themselves constantly available. To this end, bolstering team morale can be an encouraging move and flexible working environment seems to be the need of the hour.
The aforementioned uncertainties have resulted in the need for a new regulatory regime to safeguard the rights of workers and protect their interests.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Staffing industry, which is housed within the broader Zacks Business Services sector, currently carries a Zacks Industry Rank #118. This rank places it in the top 46% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates strong near-term growth prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
Before we present a few stocks that investors can buy given their growth prospects, let’s take a look at the industry’s recent stock market performance and current valuation.
Industry Underperforms Sector and S&P 500
The Zacks Staffing industry has underperformed the broader Zacks Business Services sector as well as the Zacks S&P 500 composite over the past year.
The industry has declined 15% over this period compared with 7.7% decline of the broader sector. Meanwhile, the Zacks S&P 500 composite has risen 16.1% in the said time frame.
Industry’s Current Valuation
On the basis of EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation and amortization), which is commonly used for valuing staffing stocks because of their high debt levels, the industry is currently trading at 5.78X compared with the S&P 500’s 15.27X and the sector’s 16.36X.
Over the past five years, the industry has traded as high as 9.76X, as low as 3.35X and at the median of 7.35X.
3 Staffing Stocks to Keep a Close Eye On
We are presenting three stocks that currently carry a Zacks Rank #2 (Buy) and are well positioned to grow in the near term. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Insperity, Inc.: This Texas-based company provides human resources (HR) and business solutions to improve business performance for small and medium-sized businesses. While the pandemic has had a negative impact on the company’s top line, its margins and free cash flow remain healthy on the back of favorable impact of benefits and workers’ compensation cost trends. Consistency in rewarding shareholders through dividend payments and share repurchases boost investor confidence and positively impact earnings per share.
The Zacks Consensus Estimate for current-year EPS has improved 15.3% in the past 60 days. The stock has gained 85% over the past six months.
Kforce Inc.: This Florida-based company provides professional staffing services and solutions in the United States and internationally.
The company’s technology staffing and solutions business has helped it stay competitive amid these challenging times. Rising demand for technology solutions has enabled the company to increase investments in cloud-based, technology-enabled operating model. This is expected to supplement the company’s growth amid coronavirus-induced dependency on technology. Apart from this, the company is anticipated to benefit from modifications in its business model and reduction of operating costs.
The Zacks Consensus Estimate for current-year EPS has improved 54.7% in the past 60 days. The stock has gained 35.8% over the past six months.
Robert Half International Inc.: This California-based company provides staffing and risk consulting services in North America, South America, Europe, Asia, and Australia.
Robert Half’s staffing business has been affected by the economic crisis resulting from the COVID-19 pandemic. However, the company’s wholly owned subsidiary, Protiviti continues to benefit from solid solutions offerings and pipeline.
The company has been utilizing a major share of its capital expenditures on investments in software initiatives and technology infrastructure. This should aid the company’s growth prospects amid coronavirus-induced dependency on technology. A solid balance sheet is a major positive. Consistency in rewarding shareholders through share repurchases boost investor confidence and positively impact earnings per share.
The Zacks Consensus Estimate for current-year EPS has improved 2.9% in the past 60 days. The stock has gained 34.3% over the past six months.
These Stocks Are Poised to Soar Past the Pandemic
The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.
Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.
See the 5 high-tech stocks now>>
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