When Monster (profile; site) reports its first quarter performance Thursday afternoon, the results will speak as much about the state of the U.S. economy as the company’s success at controlling expenses and boosting sales.
Wall Street analysts expect the company to report sales of around $363 million for the quarter, earning it an average of 22 cents a share, down more than a third from the same quarter the year before. And the per share earnings estimates have been dropping since the beginning of the year when the average of the analysts’ estimates stood at 41 cents per share.
Although the company has been furiously building its global business, more than half its sales still come from North America where, as every recruiter knows, hiring has slowed to a crawl. This is especially evident in such industries as finance, manufacturing, real estate, retail and hospitality, where Monster’s own Employment Index shows each of them off from their year before highs by as much as 20 percent.
The Monster Employment Index can almost be considered a proxy for the company’s North American performance. Growing consistently through the end of 2006, the Index began flattening out in spring, 2007 fluctuating for months in a range between 183 and 189. In December it plummeted to 169. Previous seasonal adjustments never were more than three or four percentage points. (December is the yearly low point for recruitment job postings, which is what the Index measures.)
Simultaneously, Monster’s North American sales were also flattening. The fourth quarter of 2007 showed a decline in sales from the third quarter, the first time in five years that had happened. Only robust growth in Monster’s international business kept the company growing.
Since the start of 2008 the economic news has only gotten worse. Net job growth has not kept pace with job market entry. Combined with layoffs, that’s pushed the national unemployment rate up to 5.1 percent. In March 2007 it was 4.5 percent.
It wouldn’t be much of a stretch under the circumstances if North American revenues were flat or even below the $184 million of the same period in 2007. Growth in the international segment is likely to again drive the company’s growth.
Monster’s misfortune is that neither of its two biggest competitors release much or, in the case of HotJobs (profile; site), anything about their financial success. CareerBuilder (profile; site), privately owned by a group of newspaper publishers, voluntarily reports revenue, which, for the last quarter of 2007 was $183 million only a rounding away from the $182.6 million of the same quarter in 2006. HotJobs revenue is aggregated with other divisions in Yahoo!’s financials, so is unknown. Industry sources speculate though that is has grown significantly as has its traffic in the last 18 months.
Other players in the recruitment arena seem to be less directly affected by the weak job market. ThinkPanmure analyst Nate Swanson released a report a few weeks ago with the curious title “Connecting The “Disconnect”: Be Greedy.” In it he mentions two of the HR software companies he follows – Taleo (profile; site) and Success Factors (profile; site) – and reports they are expected to meet or exceed earnings for the year. Of the sector, Swanson says, “We continue to hear of very strong demand within the performance management space, which has been the hottest, fastest-growing area of the HCM sector for the past 12-24 months.”
Taleo and SuccessFactors are expected to report their first quarter financial performance later in May. Kenexa (profile; site ), another major HR software vendor, is scheduled to report on May 12th.