Profit Off the Recruiting Boom With These 3 Zacks #1 Ranked Stocks
Staffing Firms Look to Continue Outperformance in 2022
The labor market has experienced an unprecedented ride over the past eighteen months. Over 22 million jobs were lost between March and April of 2020 when the country was shutdown due to the pandemic. As we can see below, just a year and a half later more than 18 million jobs have been added back - including over 500,000 this past October.
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Today’s ADP private payroll report showed the U.S. economy added 534,000 jobs in November. The official non-farm payrolls report from the Bureau of Labor Statistics is due out later this week on Friday.
While the jobs recovery has been one of the strongest in history, keen investors will note that this still leaves more than 4 million jobs (excluding the upcoming November report) just to get back to pre-pandemic levels.
We can view the unemployment rate as another confirmation indicator. After skyrocketing to 14.7% in April of last year, the unemployment rate has plunged back down to its lowest level since the start of the pandemic, hitting 4.6% in October.
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People are clearly going back to work. Investors should also note the steep drop in initial claims for unemployment benefits, which have declined 97% from their peak last year.
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These graphs paint a pretty picture for the employment narrative. But a nationwide labor shortage is making it more difficult for companies to locate and hire top talent. A recent study performed in August of this year by the Society for Human Resource Management (SHRM) found that nearly 90% of the 1,200 U.S. employers surveyed said they were struggling to fill open positions over the summer.
As investors it is our job to decipher these types of economic trends and determine how we can best take advantage via the equity markets. In this case, the staffing and recruiting space has witnessed a drastic increase in revenues as firms that are hiring are relying upon staffing firms more heavily than ever before.
The Zacks Staffing Firms industry group contains many recruitment firms and is currently ranked in the top 9% out of all 254 groups. This industry group has handily outperformed the market this year with a 43.9% return. Historical research has shown that nearly half of a stock’s future price appreciation can be attributed to its industry grouping.
Targeting firms in top industry groups will help guide you to individual stocks that are outperforming. Let’s take a look at three Zacks #1 ranked (Strong Buy) stocks that are within the Staffing Firms industry group and are benefitting from the recruiting boom.
Robert Half International, Inc. (RHI)
Robert Half International is a provider of specialized staffing and risk consulting services, assisting clients and job candidates in their recruitment and employment needs. The company was founded in 1948 and is headquartered in Menlo Park, CA.
RHI is taking advantage of strength in Protiviti, its subsidiary through which it offers risk consulting, internal auditing and information technology consulting services. Protiviti is currently producing double-digit growth in margins and revenue.
RHI has illustrated a remarkable history of earnings surprises, beating estimates in each of the last six quarters. The company last reported EPS of $1.53 for the quarter ending in September, a 9.3% surprise over consensus. Over the last four quarters, RHI has delivered an average earnings surprise of 20.5%, which has helped the stock advance over 80% on the year.
Robert Half International Inc. Price, Consensus and EPS Surprise
Analysts covering Robert Half International are in agreement regarding full-year earnings as five separate analysts have revised their estimates upward by an average of 5.38% over the last 60 days. The current Zacks Consensus Estimate for the year stands at EPS of $5.29, rendering a 96% growth rate compared to last year. RHI is next scheduled for its quarterly earnings announcement on January 27th, 2022.
Kforce, Inc. (KFRC)
Kforce is a full-service staffing firm that provides flexible and permanent staffing solutions for organizations and career management for individuals through its website, kforce.com. Through its online presence, KFRC offers various services including online resumes and job postings, interactive interviews, as well as job placements and career management strategies.
KFRC has an impressive history of earnings surprises, exceeding estimates in six out of the last seven quarters. The stock has climbed nearly 85% this year and most recently reported EPS last month of $0.96, a 10.3% surprise over consensus.
Kforce, Inc. Price, Consensus and EPS Surprise
Analysts covering the firm have revised earnings estimates upward for both this year (+10.25%) as well as 2022 (+12.9%). Positive earnings estimate revision activity can give investors a leg up during earnings season.
The Zacks Consensus Estimate for the current year stands at EPS of $3.55, translating to 35.5% growth over 2020. KFRC is due to report quarterly earnings on February 14th, 2022.
Cross Country Healthcare, Inc. (CCRN)
Cross Country Healthcare provides innovative healthcare workforce solutions and staffing services. Headquartered in Boca Raton, FL, CCRN has built a diverse client base including hospitals, physician groups, ambulatory-care centers, nursing facilities, government organizations, as well as both public and charter schools.
CCRN has put together a string of positive earnings surprises, exceeding estimates in each of the last eleven quarters. The company has delivered an average surprise of nearly 75% over the last four quarters, which has aided the stock’s incredible 196% return this year.
Cross Country Healthcare, Inc. Price, Consensus and EPS Surprise
Cross Country Healthcare most recently reported EPS for the quarter ending in September of $0.61, matching its four-quarter 75% average surprise over estimates. Analysts have been consistently revising their full-year earnings estimates upward, with the current Zacks Consensus Estimate for 2021 sitting at $2.52 – a staggering 447.8% growth rate over 2020.
What the Zacks Model Unveils
Our proprietary model is predicting an earnings beat for CCRH for the current quarter. The Zacks ESP (Earnings Surprise Prediction) seeks to find companies that have recently seen positive earnings estimate revision activity. When combining a Zacks #3 ranking or better with a positive ESP, stocks produced a positive earnings surprise 70% of the time.
As a Zacks #1 ranked (Strong Buy) stock and with a current ESP of +26.36%, CCRH is primed for yet another positive earnings surprise. The company is next scheduled to report earnings on February 23rd, 2022.
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