Our NED, Suhail Mirza, discusses the performance of US-listed recruiters over the past two months, highlighting the strong performance of the US economy and the impact of Trump’s trade tariffs.
As the US went to the polls on 6th November for watershed mid-term elections, The Economist remarked that “the country is more divided and angry than it has been in decades.” As we now know the Democrats regained the House of Representatives while Republics increased their hold in the Senate.
The last two months have certainly witnessed large listed US recruiters incurring the wrath of capital markets. Over the period from 21st September to close of markets on 23rd November, the S&P500 has dropped over 10 per cent from 2929 to 2632. It is sanguine to note that it had hit a new peak at the end of the summer.
Manpower (market cap $4.96 billion) has beaten the market by seeing its share price fall “only” 6.3 per cent from $85.6 to $80.2. Smaller peer, Kelly Services (market cap $863 million), matched the index by dropping 10 per cent from $24.66 to $22.20. Robert Half (market cap $7.14 billion) dropped 16.6 per cent over this period from $70.48 to $58.58 and Kforce (market cap $804 million) plummeted by over 22 per cent from $37.70 to $30.86.
Both ASGN (market cap $3.5 billion) and Insperity (market cap $4.05 billion) fared slightly better, shedding 15 per cent and 15.6 per cent of market value over the period from 21st September to 23rd November. Interestingly, both posted very healthy quarterly results during this period. Houston-based Insperity delivered record third-quarter results on 1st November with adjusted EBITDA up 43 per cent from the same quarter last year. Paul J Savardi, CEO, was in ebullient mood: “Our refined business model is continuing to generate outstanding growth and profitability as demonstrated by the record quarter and year to date results.”
ASGN, meanwhile, reporting third-quarter results on 26th October, highlighted a 35.9 per cent rise in revenue and almost doubling of net income from $24.9 million to $49.2 million. Attributing success to its “shared resource” delivery model, CEO, Peter Damaris, added: “The US economy continues to perform well and our commercial and governmental clients are aggressively investing in their businesses.”
And notwithstanding the tumult in the capital markets, the US economy has indeed been performing remarkably well. Even as the emerging markets suffer (particularly due to volatile conditions in financial conditions) and the larger advanced economies slow gently, the US remains the only economy that the IMF projects will record faster expansion this year than last.
On 26th October the US economy reported third-quarter annualised growth of 3.5 per cent; following on from the 4.2 per cent rate recorded for the second quarter. This is highly impressive as only on one other occasion has the US economy recorded two consecutive quarters of such speedy growth in the decade since the global financial crisis.
And indeed a couple of larger listed US recruiters did buck the trend, recorded above for the performance of the market. Heidrick & Struggles (market cap of $674 million) managed to eke out a small price rise from $34.95 to $35.56. AMN Healthcare (market cap of $2.81 billion) was the standout performer, however, over the two months to 23rd November; its share price propelled upwards by 17 per cent from $51.20 to $59.95.
Investors are keeping a close eye on economic matters as, despite the growth described above, they remain worried at the relatively low level of investment in the economy. Trade also remains a source of concern not only due to the bellicosity of trade threats from the Trump administration but the potential impact on costs from the Trump trade tariffs already imposed on China. They have also not failed to notice that the European and Asian stock markets have been falling since May.
When one adds the recent precipitous fall in the oil price and the fact that the IMF has lowered (albeit slightly) its projected growth rate for the world economy, from 3.9 per cent to 3.7 per cent, into the mix we are clearly entering a pivotal period for investors. The current imbroglio over Brexit is also hardly a cause for comfort either. Rarely has US politics required the need for a unifying approach to these factors and thus it is with some trepidation that we note The Economist’s view of the country post the mid-term election results: “A starkly divided country now has a divided Government.”
This article was originally published in Recruitment International.