Monday, April 21, 2008

Manpower (MAN) as a Weak Dollar Play? Who Knew.

There is only so much time in the day and only so many companies/sectors one can keep track of. My team of 10 analysts (read: 10 hamsters) did not realize that Manpower (MAN) was in fact an overseas, weak dollar play. As portfolio manager I made them run the wheel extra hard this weekend for not notifying me of this fact before hand. I wrote last week

Manpower (MAN) - a key tell on the temporary workforce in America and "blue collar" temps especially. Canary in the coal mine type of company.

So my team of analysts made me look bad, and when I saw the big move in MAN on this week's top returner list I had to go investigate... and I discovered a completely different company than I anticipated. France is their #1 country of business?
  • Manpower chairman and CEO Jeffrey Joerres noted that some of the company's European operations -- namely Elan, Germany and Italy -- reported revenue increases of 43 percent, 22 percent and 15 percent, respectively. Manpower's largest country of business, France, posted a 16 percent increase in revenue, to $1.7 billion.
Weak dollar play?
  • Employment services company Manpower Inc (MAN) posted much-higher-than-expected quarterly profit on Friday, reflecting strength in its international operations and the weakness of the U.S. dollar, and said second-quarter profit will be above Wall Street estimates.
  • Milwaukee-based Manpower, which generates the bulk of its sales and earnings outside the United States, said operating profit in its U.S. operations fell 37.6 percent, but were sharply higher in France, Italy and other international markets.
  • Investments in international markets, including Asia and the Middle East are paying off at a time when some large economies -- notably the United States -- are slowing, Chief Executive Jeff Joerres told Reuters in an interview.
  • "There was a lot of thinking, from the sell-side and the buy-side, that the gig is up and what we're seeing is that there are places that are slowing down, but the portfolio is kicking through," he added.
  • Revenue soared 19.0% in dollar terms to $5.4 billion, helped greatly by the weakness of the greenback. Excluding the positive impact of foreign-exchange transactions, revenue increased nearly 8%. (so 11% due to currency only!)
Potential Chindia play?
  • Marcon also said emerging markets tend to have higher gross margin than more mature markets. Developing countries like China and India have big labor markets and represent a significant long-term opportunity, Marcon said.
Moving more to permanent placement with higher margins?
  • Manpower plans to increase its percentage of revenue derived from high-margin permanent placement to 15% of total gross profit, up from the current 8% level,” Baird analyst Mark Marcon said.
People always comment or email me, how do I find ideas or develop thesis. Simple. I read, read, read, read, read. When the other hamsters sleep, I read. Hard work, but I have a big goal so I have to outwork the fat cats. Or hamsters. Or lemmings. Or Kool Aid drinkers.

Am I going to be buying Manpower tomorrow? No, and I think Europe is set to slow down so I don't know the company well enough to know the impact - but the name just got a lot more interesting and officially on my radar. If you read the points above and I didn't tell you what the sector or name of the company was you'd think I was talking about Deere (DE) or some other major multinational.

No position

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