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On Thursday, Barclays (LON:BARC) adjusted its outlook on Randstad NV (AS:RAND:NA) (OTC: RANJF), reducing the price target from EUR 48.00 to EUR 42.00, while retaining an Underweight rating on the company’s shares. The revision follows Randstad’s fourth-quarter earnings, which showed organic growth matching expectations at a decline of 5.5%, but a gross margin that fell short of projections by 20 basis points.
The analyst from Barclays acknowledged Randstad’s potential in a recovery phase, expecting that the current headwinds affecting gross margins, such as mix and disposals, will normalize over time. Despite this, the firm expresses a cautious stance on Randstad’s near-term operating profits, citing ongoing market challenges and limited scope for administrative cost reduction.
Randstad’s fourth-quarter full-time equivalent (FTE) employee count stood at 40,130, which is roughly 4-5% higher than the 2019 figures, yet significantly lower than the peak seen in the third quarter of 2022, with a 16% decrease. Barclays anticipates difficulty for Randstad in finding additional cost savings if market conditions persist, potentially leading to operating margins falling below 3.0% in the near future. This is particularly concerning given that operating margins in the sector generally range between 3.0% and 5.0%.
Barclays projects that Randstad will experience its lowest margins in the first quarter at 2.6%, with a gradual improvement thereafter. However, the current valuation does not fully reflect these challenges, according to Barclays, with Randstad’s stock trading at 10.7 times its forecasted FY26 earnings per share, which is close to its two-year average of 11.4 times.
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