ManpowerGroup Downgraded On Brexit Uncertainty

Shares of ManpowerGroup Inc. (NYSE: MAN) have plummeted on Brexit related uncertainties. Avondale Partners’ Randle G. Reece downgraded the rating on the company to Market Perform, while reducing the price target from $96 to $74. The analyst commented that the expectations for the company had been lowered to reflect the U.K.’s departure from the EU.

“While the stock carries relatively low valuation multiples, uncertainty about conditions in Europe and the UK have reduced our confidence in forecasting and valuation…Current valuation multiples are mired between expansion and recession levels,” analyst Randle Reece wrote.

Related Link: HSBC Gets An Upgrade From JPMorgan Despite Brexit-Led Onslaught Of Bank Rating Cuts

What Brexit May Mean For The Company

The major markets served by ManpowerGroup are unlikely to plunge into recession. Reece added, however, investors may have increasing concerns around “hiring sentiment in continental Europe and the UK,” which contributes about 66 percent of the company’s revenue.

The analyst expects a sharp decline in the British pound, which was already 5 percent below its 2Q16 average on Friday, while the euro also closed 2 percent below its quarter-average price. He added, “We also trimmed revenue growth assumptions in Europe; we already see signs that uncertainty triggered by the UK vote could dampen hiring sentiment in the UK and Europe.”

The EPS estimates for FY16 and FY17 have been reduced from $5.96 to $5.83 and from $6.52 to $6.11, respectively.

At time of writing, ManpowerGroup was down 13.32 percent on the day, trading at $57.67.