US recruiters continue upward trend despite US-China "trade war"
Suhail Mirza discusses the performance of the US-listed recruiters over the past couple of months, highlighting their flourishing results despite the country's current trade war with China.
The past two months has seen the US-China "trade war" escalate with the Trump Administration adding an additional 10 per cent tariff on $200 billion of Chinese imports in mid-September; this represents over half of the value of all Chinese imports. Beijing has immediately responded by imposing tariffs on $60 billion of US goods and services and accusing the US Administration of a lack of "good faith" in trade negotiations.
Despite this, virtually all the largest listed US recruiters featured below have continued a run over the past year, which has delivered very positive returns to shareholders. They have easily outperformed the wider capital market. The S&P 500 for example, over the two months (from 20th July to close of markets on 21st September) at the time of writing has risen 4.56 per cent from 2801 to 2929. It has risen by over 17 per cent over the past year.
Largely positive results
While the past two-month period has seen a mixture of share price performances from the recruiters below they have all, with one exception, seen rises (most very significant ones) over the past year. The exception has been Manpower Inc (a market cap of $5.56 billion), which has seen its share price tread water over the past two months (falling from $86.55 to $85.74) but has declined by over 26 per cent in the past year. Its price-earnings (P/E) ratio is a relatively modest 11.15. The other two laggards of the past two months have been AMN Healthcare (market cap $2.44 billion) and ASGN (formerly On Assignment), which has a market cap of $4.16 billion. The formed has nosedived by over 16 per cent and the latter dropped by 5.9 per cent over the past two months to close of markets on 21st September. However, over the past year AMN has risen by over 25 per cent and ASGN an eye-watering 56.2 per cent, easily outperforming the broader market.
Elsewhere it has been a buoyant two months and a confirmation of a positive year of trading. Robert Half (market cap of $8.67 billion) nudged up by 3.4 per cent in the past two months but has delivered over 47.5 per cent in share price rises in the past year. Kelly Services (market cap $944 billion) has notched up 6.3 per cent of gains in the past two months and growth over the past year, albeit only 3.48 per cent. Heidrick & Struggles enjoyed only a modest price rise of 1.9 per cent and yet over the past year has had a staggering 86.58 per cent price rise!
Both KForce Inc (market cap $1 billion) and Insperity Inc (market cap $4.82 billion) have seen significant share prices over the past two months. The former has risen by 7.1 per cent from $3.75 to $38.30 and over the past year to the close of markets on 21st September has more than doubled (104.8 per cent) its market valuation. Insperity is the true standout, however, with over 17.6 per cent rise over the past two months, from $97.75 to $115.00, and a truly staggering 182.4 per cent rise over the year! Indeed, Insperity announced a record second quarter set of results on 1st August (for the three months to 30th June) with EBITDA rising 40 per cent to $47 million and gross profit up by 18 per cent. Little wonder that chairman and president, Paul J Savardi, was upbeat, saying, "Our dynamic business model is continuing to generate impressive financial results. Insperity is poised for growth acceleration over the balance of the year.
Preparing for potential obstacles
Notwithstanding the above, recruiters will keep a close eye on the potential damage the current (and perhaps likely escalating) trade war between the US and China will bring to both the domestic US economy and the global landscape. Large trade associations in the US have been pouring incentive on the imposition of tariffs by President Trump with Matthew Shay, president of the National Retail Federation, warning, "As thousands of businesses have testified and explained in comments to the Administration, tariffs are a tax on American families."
The trade war may be part of a broader generational shift in the centre of economic power globally. The US, for example, at the time fo the post-WWII world economic settlement hammered out at Bretton Woods, accounted for a third of global economic output; its intervention was crucial to the rebuilding of Europe and Japan. Today, the US accounts for 20 per cent of global economic output and China and other powers are trimming its heft in economic terms. Such re-alignments are never smooth in history and it can only be hoped that the Trump Administration takes heed of the exhortations of the trade associations that echo the sentiments referred to above.
Article originally published in Recruitment International: http://library.myebook.com/RI/ri-october-2018/1362/#page/48