Monster Pre-Earnings: Expecting A Decline In The Third Quarter

Monster (NASDAQ:MWW) will report its Q3 2014 financial results on Tuesday, November 4th.  Market participants will be keen to assess the impact of its recent strategies in the quarterly earnings, considering the company posted disappointing results in the last quarter. Competitive pressure, along with weakness in the international business have caused this business to stumble. Consequently, Monster’s stock has seen significant decline over the recent past.

The company is undertaking various measures to stem this decline, such as expanding the number of job listings, leveraging social media and adding more flexibility to its pricing plans. It also recently launched a cloud-based candidate relationship management tool to spur engagement on the platform. We believe Monster will see sequential decline in revenue in the third quarter. However, if the new products and strategies gain traction, it could get back to sequential growth in the fourth quarter. We will be revising our $6.91 price estimate for Monster’s stock after the quarterly earnings.

See our complete analysis for Monster

Monster’s Business Is Facing Intense Pressure

Monster’s stock price has fallen by over 40% during the last three months, as concerns related to rising competition and dwindling growth, have led to doubts regarding the company’s future. During Q2, its revenue decreased by 3% annually and 2% sequentially, due to significant decline in the European business, under-performing our expectations. The rising competition in the recruitment industry is causing downward pressure on pricing. In addition, the company accelerated the transition of its sales force during the second quarter to prepare them for newer products and services, and this weighed on the quarterly sales.

It also appears that Monster has been relatively slow in terms of adapting its products and services to the changing recruiting environment, upon which LinkedIn has had a significnat impact. The hiring industry is increasingly moving towards leveraging social profiles and platforms. Until Monster can successfully harness this shift, we think its business will remain subdued.

Various Measures Are Being Taken To Address Challenges

Monster is undertaking a slew of measures to ward off competition and reinvigorate its growth. It has dramatically raised the number of job listings on its portal. It now sources jobs from both regular and social sources, and leverages the latest trends in hiring. The number of job listings on its U.S. network has risen from 250,000 in January 2014 to over 3 million in August 2014. ^[1] It aims to capture more than 6 million job listings across its global network in the near future. We think this target is impressive considering the global market for unique job listings stands at around 6 million, according to our estimates (see Looking At The Global Opportunity As LinkedIn Expands Its Job Listings). We think this expanded network could help pull in additional traffic on the platform.

The company aims to leverage social networking to boost its adoption. It ran beta test for Monster Twitter Cards in the second quarter and launched the product for the entire sales force in the U.S. in July. We will be watching out for the impact of this strategy in the third quarterly results. In February 2014, , Monster acquired TalentBin and has now successfully integrated more than 120 million aggregated candidate profiles, boosting its database with the more coveted passive job seekers. ^[1] It has also made its pricing options more flexible, by adding duration and pay-per-click options for customers. In addition, it recently  introduced a cloud-based candidate relationship management tool that allows recruiters to identify and reach desired candidates with specific messages and custom recruitment campaigns.

Monster’s sales in Europe and Asia have suffered in the past few quarters, owing to various macroeconomic and competitive challenges. In response, the company has restructured its international operations by downsizing on certain businesses and focusing on a few key ones. While these measures could spur growth, we will be keen to understand their initial success during the third quarter to model their impact in the long-run.

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1. Monster Worldwide’s (MWW) CEO Salvatore Iannuzzi on Q2 2014 Results – Earnings Call Transcript, Seeking Alpha, August 5, 2014 [↩] [↩]