Skip to Content
Morningstar

Robert Half Earnings: We Plan to Slightly Decrease Fair Value Estimate; Stock Remains Undervalued

Industrials Sector artwork

We expect to decrease narrow-moat-rated Robert Half’s RHI $94 fair value estimate by 2% to 4%. Hiring demand continues to soften given the uncertain macroeconomic landscape. Robert Half’s third-quarter consolidated revenue of $1.56 billion decreased nearly 15% year on year but lies within management’s previous guidance. Diluted earnings per share of $0.90 also met expectations, in fact, results were at the upper end of the management’s prior guidance. We see management meeting the upper end of guidance as a positive sign. In our view, it demonstrates the firm is weathering the current climate. Management released fourth-quarter EPS and revenue guidance of $0.82 and $1.47 billion at their respective midpoints, signaling that customer hiring activities will still stagnate. Nonetheless, we think the stock remains undervalued, and we maintain our long-term thesis on Robert Half’s strong competitive positioning.

During the third quarter, consolidated revenue decreased 14.7% year on year to $1.56 billion, marking the fifth quarter of sequential sales decline. Both business clients and job candidates are showing risk aversion to employment change. Clients hesitate to commence new recruiting initiatives due to budget sensitivity and fear of not finding ideal replacements, while many candidates seek the familiarity and security of their current employers rather than risk being laid off in new roles. Consequently, we expect to marginally lower our total revenue forecast for 2023.

We think the headwinds Robert Half faces are temporary. Weak hiring demand is a headwind for all staffing companies in the industry. Eventually, we expect a strong rebound, especially for Protiviti, its subsidiary consulting arm specializing in technology, risk, and compliance matters. Businesses will continue to advance their technological capabilities and seek legal assistance relevant to their operations, driving demand for such talents and services.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

More in Stocks

About the Author

Joshua Aguilar

Director of Equity Research, Resources
More from Author

Joshua Aguilar is the director of resources equity research for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc.

Aguilar joined Morningstar in 2016 as an associate on the financials team, and he was promoted to analyst on the industrials team in 2018 and to senior analyst in 2022. He has served as associates coordinator since 2021 and led Morningstar's diversity efforts as DEI co-chair since 2020. Aguilar has been a mentor to several associates on their paths to becoming analysts. He also has hosted a Morningstar earnings town hall, participated in analyzing Morningstar stock, and been a strong contributor through both client interactions and his General Electric stock call. Aguilar co-authored an Outstanding Research Achievement-winning piece with colleague Kris Inton on CEO compensation in 2021. He also has taught Morningstar's model to new hires for many years as part of the valuation committee.

Before joining Morningstar, Aguilar was a practicing business transactional attorney in Florida. He graduated magna cum laude with a bachelor's degree in political science and criminology from the University of Florida. He also has a Master of Business Administration from Rollins College and a Juris Doctor from Wake Forest University.

Sponsor Center