Monster Pre-Earnings: Growth Likely Accelerated In Q4, But Currency Headwinds Likely Hit Earnings

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MWW: Monster Worldwide logo
MWW
Monster Worldwide

Monster (NASDAQ:MWW) is scheduled to report its fourth quarter results for 2014 on Tuesday, February 10th. Its business has highly under-performed over the last few years, due to increased competition from professional social-networking sites as well as regional sites, leading to around 70% erosion in its stock value over the last five years. The latest earnings assume heightened significance, considering the results will be a test of the company’s latest strategies that include expanding the number of job listings and candidate profiles, leveraging social media, and adding more flexibility to pricing plans.

We expect the company to report sequential growth in the top-line for the fourth quarter, bolstered by results in the North American region. Since the transition of the sales force to train them on newer products and services was completed at the end of Q3, we expect this contributed to an acceleration of revenue growth that will continue into the coming quarters. However, we expect currency headwinds impacted results from the international region during the fourth quarter, as well.

Our $5.59 price estimate for Monster’s stock, represents around 30% premium to the current market price.

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See our complete analysis for Monster


Various Measures Are Being Undertaken To Reinvigorate Growth

Monster is taking several steps to revive its business, amid a rapidly changing competitive environment. The number of job listings on its portal have risen significantly from 250,000 in January 2014 to over 4.5 million in November 2014, and could surpass 7 million globally by the middle of this year. The company now includes postings from both regular as well as social sources, utilizing the latest social trends in hiring. We believe this expansion in job listings (once released widely) will help drive additional traffic and engagement on its platform.

Additionally, Monster is also leveraging social networking to bolster its offerings for recruiters. Its ‘Twitter Cards’ product, which allows employers to reach out to the more coveted passive candidates, has achieved early success.  We expect the company to come up with more such social products in the future as well. The integration of TalentBin has gone well.  In fact, more than 150 million aggregated candidate profiles had been added by the end of Q3 2014 and additional hundreds of millions of profiles will be commercialized in the near-term. Pricing plans have also been made more flexible, with the introduction of duration and pay-per-click options for customers. We will be looking for a progress update regarding these growth strategies during the earnings call. Since the hiring market is shifting towards utilizing social profiles and platforms, we’d be closely monitoring Monster’s ability to harness this shift, since this will be essential for its long-term growth (in our view).

North American Results Could Carry Earnings During Q4

We expect North American sales to be up on a quarter-over-quarter basis in the fourth quarter, as the recent growth strategy is gaining traction within the region. North American bookings rose by 7% annually in Q3 and we expect a similar trend to persist during the fourth quarter.

Monster’s international revenues could come in weaker during Q4, with the recent strengthening of the U.S. currency. However, on a constant currency basis, we expect revenue from Careers-International to rise sequentially. Though we expect growth in Asia Pacific results during Q4, the European region could continue to show macroeconomic challenges in certain geographies (in our view). Monster’s results in this segment are unprofitable, and we’d keep a close tack on the progress of Monster’s new strategy in this region to forecast its future profitability outlook.

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