ManpowerGroup Still Rated Overweight After Announcing 7S Group Acquisition

ManpowerGroup Inc. (NYSE: MAN) announced on Friday it will purchase the 7S Group in Germany. Following this declaration, Piper Jaffray analysts George Tong and Adrian Paz reiterated an Overweight rating and $103 price target on the stock.

The experts explained that “Positive traction in the European Quantitative Easing program creates an operating tailwind for Manpower, which generates two-thirds of its temp staffing revenue from the EU area.”

Overweight Because...

The firm remains a buyer of ManpowerGroup shares based on the following rationale:

• 1) Success in the QE program has generated more than €60 billion in monthly asset purchases since March. Furthermore, ECB President Mario Draghi recently reaffirmed his commitment to continue to purchase €60 billion in assets per month until the end of September 2016 “or until there is a sustained adjustment in the path of inflation to just under 2 percent, suggesting at least €1.1 trillion in total asset purchases,” the analysts explicated. “With asset purchases totaling €184 billion since Mar and EU inflation well below 2 percent, we see meaningful runway for the monetary stimulus to continue.”

Related Link: Here's How Quantitative Easing In Europe Could Affect U.S. Businesses

• 2) The QE is already leading to improving GDP, unemployment and inflation figures in the EU. The ameliorating macro environment can work as a strong catalyst for the pro-cyclical temp staffing business. In fact, Piper Jaffray expects accelerating temp demand in the region over the next 4 to 6 quarters.
• 3) The analysts believe temp staffing is an appealing early cycle play. The anticipate Manpower will generate constant currency revenue growth acceleration from 4 percent in 2014 to 6 percent in 2015, and to 6.5 percent in 2016. Moreover, the stock’s valuation stands below its peers’ valuation and the experts said, “A depressed multiple on depressed earnings and indications of earnings growth acceleration with an upward bias to estimates create an attractive buying opportunity for Manpower shares.”

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