Macquarie Group Limited Analyst Kevin McVeigh says he considers Robert Half International Inc. (RHI) a good mid-cycle name that is currently trading at attractive levels. He expects Robert Half to enjoy incremental upside this year.
“This was a stock that had seen some pressure in 2013 as a result of a large contract that had expired and created about a 300 basis point headwind to the revenue,” McVeigh says. “That reverses itself in Q1 of this year, and should turn it around and help them grow that revenue that much more.”
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McVeigh says he also expects Robert Half to benefit from its Protiviti business. He says that segment peaked early relative to the overall sector. In 2006 and 2006, he says Protiviti actually created a $0.20 headwind to earnings. But, he says the segment is now “hitting its stride” and should contribute to upside for Robert Half in 2014.
“Our sensitivity suggests that for every 150 basis points of margin outperformance another $0.05 or so would accrete to the bottom line. So of our 10% margin assumption for Protiviti, if it is able to do 13% or so in 2014, that alone adds about $0.10 to earnings,” McVeigh says. “We continue to think there is a lot of optionality there, and the company also is wisely investing in front of what’s likely a pickup in demand, so expect to see some benefits from those investments as well.”
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