Does the LinkedIn Effect Reach Down to the Loading Dock?

LinkedIn (LNKD) has helped big companies find top talent, increasingly enabling employers to bypass costly headhunters, as YCharts recently noted. But surely staffing the loading dock and hiring clerks for the back office remains safe from the social networking world. That would seem to be the investment thesis behind a bump in temp services stocks, particularly with hiring trends generally improving.

The favorites of the sector now are Robert Half International (RHI), ManpowerGroup (MAN), Kelly Services (KELYA) and Kforce (KFRC), all of whose business models were built in a pre-social-networking world. Share prices for each of those companies has racked up more than double the S&P 500 gains in the past six months, as seen in a stock chart.

RHI Chart

RHI data by YCharts

They have sustained business in a sluggish job market with a healthy temp service. Earnings are expected to gain as more permanent workers are hired, since those placements bring in bigger profits. The bullish premise for all of these companies lies in expectations of more hiring this year and an implied need for a high-profit margins service to help corporations fill those jobs. Monthly and weekly jobs reports from the government, as well as private sector staffing reports, heavily impact share prices.

Skepticism about the sector is understandable, though, particularly after the latest round of earnings results. None of them reported revenue gains or great earnings. Monster Worldwide (MWW), the least old-fashioned of the companies with online jobs listings at its heart, has been for sale for about a year now without generating much interest. The bigger companies like Manpower rely heavily on job growth in Europe and other parts overseas where it’s just not happening. Based on trailing PE ratio, only Kelly is remotely cheap.

RHI Revenue TTM Chart

RHI Revenue TTM data by YCharts

Meanwhile, LinkedIn continues to develop fee-based services for employers looking to hire. Looking at its sales since the company went public two years ago, it’s not hard to see where some of those staffing sector revenues have gone.

LNKD Revenue TTM Chart

LNKD Revenue TTM data by YCharts

Dee Gill, a senior contributing editor at YCharts, is a former foreign correspondent for AP-Dow Jones News in London, where she covered the U.K. equities market and economic indicators. She has written for The New York Times, The Wall Street Journal, The Economist and Time magazine. She can be reached at editor@ycharts.com.

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