The third quarter proved to be worse than expected for the job placement market, according to staffing services company Kelly Services Inc. However, amidst these challenging conditions, there was a lone bright spot – the strong demand for education jobs.
Kelly Services Inc. reported that their third-quarter sales fell short of expectations. Nonetheless, their profit exceeded expectations by a significant margin, leading to a surge in their stock price. In fact, the stock reached a 15-month high.
One of the standout segments for Kelly Services Inc. was education. In the third quarter, their Education revenue experienced a significant jump of 22.9% compared to the previous year. This growth followed a 32.6% increase in the first quarter. The demand for education jobs remained strong, coming from both existing and new customers.
Despite the overall challenges faced by the staffing market, Chief Financial Officer Olivier Thirot pointed out that the education business, including their pre-K-12 and Pediatric Therapeutics Services (PTS) therapy solutions, continues to be a significant growth engine for the company.
In conclusion, while the job placement market experienced difficulties in the third quarter, the demand for education jobs remained robust for Kelly Services Inc.
Changes in Business Segments Revenue
The demand for Kelly’s services varied significantly across different business segments. In Science, Engineering, and Technology (SET), the revenue experienced a decline of 8.0%, amounting to $295.7 million. The demand for permanent placement fees also took a substantial hit, plunging by 39%.
Similarly, in the Professional & Industrial sector, the revenue dropped by 10.8%, reaching $364.5 million. Within this segment, the revenue from staffing products witnessed a decline of 15%, while placement fees nosedived by 50% due to persistently low demand for full-time jobs.
Improved Financial Performance
Despite the challenges faced in certain segments, the company managed to turn its fortunes around. For the quarter ending September 30th, Kelly recorded a net income of $6.6 million, or 18 cents per share. This was a significant improvement compared to the loss of $16.2 million, or 43 cents per share, in the corresponding period last year.
When excluding nonrecurring expenses such as business transformation-related charges, the adjusted earnings per share doubled from the previous year, reaching an impressive 50 cents. These results exceeded the FactSet consensus estimate of 26 cents.
Strategic Business Decision
In a strategic move, Kelly recently announced its agreement to sell its European staffing business to Gi Group Holdings S.P.A. for 130 million euros (equivalent to $139.1 million at current currency prices).
Steady Stock Performance
As a testament to its resilience, Kelly’s stock has shown strong performance throughout the year. Year to date, the stock has rallied by 15.1%, indicating positive investor sentiment. In comparison, the broader market S&P 500 index (SPX) has advanced by 13.5%.