Reuters.com investment columnist Erik Dellith is seeing some caveats to the European growth outlook in 2007… yet Manpower is nonetheless expected to improve earnings in 2007.
Not only has sentiment in Germany fallen for nine consecutive months, but Europe’s largest economy is also bracing for a planned 3-percentage point hike in the value-added tax (VAT), which is expected to help ease growth, he notes. A recent Reuters poll of economists looks for the German economy to expand 2.3 percent this year, but then grow only 1.3 percent in the next year.
Still economists seem to be optimistic on growth in the European Union. Although they expect growth to ease in 2007 from the pace in 2006, economists have been revising their estimates up slightly. According to a recent Reuters poll, economists expect growth in the EU to ease to 1.9 percent next year after hitting 2.6 percent this year.
Protracted EU growth is particularly important for companies like Milwaukee-based Manpower Inc. Strength in many European economies helped the temporary-services provider post a 32 percent increase in third-quarter earnings.
Manpower Chief Executive Jeff Joerres explains that more-flexible labor laws are helping to drive demand. Against this backdrop, analysts believe Manpower will benefit. They expect the company to generate earnings per share (EPS) of about $4 in 2007, up from an expected $3.47 this year. And analysts, on average, expect the company to continue to grow its EPS at an average annual rate of 15 percent going forward.
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