KELYA - Kelly Services (KELYA) - Gearing Up For Meaningful Change
4Q21. Revenue of $1.25 billion was up 0.7% year-over-year (1.1% in constant currency) but up 6% when adjusting for the additional week in 2021. Consensus was $1.3 billion and we were at $1.31 billion. Kelly reported operating earnings of $15.3 million, compared to $9.5 million in 4Q20, and $19.4 million versus $13.9 million on an adjusted basis. GAAP EPS for 4Q21 was $1.80 compared to $0.59 in 4Q20. Adjusted EPS for the fourth quarter was $0.65 versus $0.41 last year. We had projected adjusted EPS of $0.32.Monetization of APAC. Kelly entered into an agreement to sell nearly all of its PersolKelly JV and its shareholdings in Persol Group. Net cash proceeds are anticipated to be approximately $255 million, or $6.75 per KELYA share. Combined with availability under its credit facilities, Kelly has about $0.5 billion of capital to accelerate its growth in high-margin, high-growth specialties.Operating Environment. The operating environment remains mixed. Omicron and talent shortages continue to be headwinds, although the workforce participation rate continues to inch upward which should help alleviate supply. Companies continue to seek out employees, with available jobs remaining well above the number of unemployed. Updated Projections. Omicron and talent supply constraints likely will impact 1Q22, but we expect to see sequential improvement through 2022. For 1Q22 we are projecting revenue of $1.26 billion and net income of $9.5 million, or $0.23 per share, For the full year, we are at revenue of $5.15 billion, net income of $64.4 million, or adjusted EPS of $1.67, and adjusted EBITDA of $112 million.Maintaining Outperform and $30 PT. We are maintaining our Outperform rating and our 12-month price target of $30. While the recovery is occurring at a slower pace than anticipated, Kelly's specialization focus, spiced up with the capital from the Persol sales, will help drive faster top line growth and higher margins over time. At our price target, KELYA shares would trade at 18x our 2022 adjusted EPS estimate, 6.8x EV/estimated 2022 EBITDA, and 0.15x EV/estimated 2022 revenues. Read More >>