On Friday, Barclays (LON:BARC) analyst Manav Patnaik upgraded Robert Half International Inc. (NYSE:NYSE:RHI) stock rating from Underweight to Equalweight and set a price target of $80.00. The adjustment reflects a more balanced view of the company's prospects amid a steady labor market and increased small business confidence.
According to InvestingPro data, RHI maintains a FAIR financial health score, with the notable strength of holding more cash than debt on its balance sheet. The company has also demonstrated commitment to shareholder returns, maintaining dividend payments for 21 consecutive years with a current yield of 3.09%.
Patnaik pointed to the recent surge in the NFIB's small business optimism index, which has reached its highest levels since June 2021, as a positive indicator for Robert Half, which has significant exposure to small businesses. The firm's stability is further supported by employment data, specifically JOLTS data for firms with 50-249 employees, suggesting a limited downside risk for the staffing company. InvestingPro analysis reveals the company's solid financial position, with a current ratio of 1.72 indicating strong liquidity to meet short-term obligations.
The analyst also noted the improving results from Protiviti, Robert Half's largest client for temporary staffing, as a factor in the upgraded rating. The broader market's recovery in spending is expected to benefit Protiviti, thereby supporting Robert Half's performance.
Despite the upgrade, Barclays maintains a cautious stance on the potential for hyper-cyclical growth that would warrant an Overweight rating. The firm historically sees such growth as a result of increased temporary versus permanent hiring during recessions. Additionally, the medium-term impact of Generation AI on finance and accounting placements, which make up 74% of Robert Half's temporary business, is a subject of debate.
While it's unlikely to affect the company in 2025 or 2026, the ongoing discussion could influence market perceptions. For deeper insights into RHI's valuation and growth prospects, InvestingPro subscribers can access comprehensive analysis, including 12 additional ProTips and detailed financial metrics that help evaluate the company's position in this evolving market landscape.
In other recent news, Robert Half International reported a decrease in third-quarter revenues to $1.465 billion, a 6% drop from the previous year. The company's net income per share also fell to $0.64, down from $0.90 in the same period last year. However, Protiviti, a subsidiary of Robert Half, saw a 5% increase in revenues, reaching $511 million. For the fourth quarter, Robert Half provided revenue guidance set between $1.34 billion and $1.44 billion, with earnings per share projected at $0.47 to $0.60.
Truist Securities upgraded Robert Half's shares from Hold to Buy and raised the price target to $90, based on anticipated further rate cuts, moderating inflation, and growth opportunities for Protiviti. In contrast, CL King revised its outlook and reduced the company's price target to $80, while retaining a Buy rating.
These recent developments reflect Robert Half's ongoing efforts to navigate challenging market conditions. Despite a decrease in revenues, the company anticipates a 20% to 30% increase in productivity without adding headcount if macroeconomic conditions improve.
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