KELYA - Kelly Services Inc. (KELYA) - Recovery Continuing Reinstates Dividend
2Q21. Revenue of $1.26 billion was up 29% year-over-year (26.2% in constant currency) driven by increased customer demand as the economy recovers and a 310 bp impact from Softworld. Kelly reported operating earnings of $13.7 million, up 24.1% y-o-y, and up 29.3% sequentially. GAAP EPS for 2Q21 was $0.60 compared to $1.04 in 2Q20. Adjusted EPS for the second quarter was $0.49 versus $0.51 last year. We had projected revenue of $1.25 billion and adjusted EPS of $0.32.Demand Continues to Rebound. Kelly saw strong demand across all of its operating segments in the quarter. P&I revenues rose 14.8% y-o-y, SET rose 20.6%, Education was up 322.1%, OCG revenues rose 28.2%, and International revenues were up 31.6% y-o-y. Operating earnings rose in each segment, with the exception of P&I.Reinstated Dividend. Kelly's Board declared a dividend of $0.05 per share, payable September 7th. Recall, Kelly suspended its $0.075 per share quarterly dividend in April 2020 during the height of the COVID crisis to preserve cash. The reinstatement is a strong message that the worst is behind the Company, in our view.Updated Projections. Management was a little more conservative for the 2H21 given the uncertainties surrounding the new delta variant and ongoing supply constraints. We modestly reduced our second half revenue expectations, but still see a solid year for the Company given better than expected margins. For the third quarter, we are projecting revenue of $1.275 billion and EPS of $0.44. For the full year, we are now at revenue of $5.05 billion and adjusted EPS of $1.63.Maintaining Outperform and $30 PT. We are maintaining our Outperform rating and our 12-month price target of $30. We continue to believe the worst is behind Kelly and the specialization focus will help drive faster top line growth and higher margins over time. We believe the shares represent a favorable risk/reward at the current price. At our price target, KELYA shares would trade at 18.4x our 2021 adjusted EPS estimate, 11.7x EV/estimated 2021 EBITDA, and 0.2x EV/estimated 2021 revenues. Read More >>