The Ratings Game: Job search company Robert Half double downgraded on signs labor fundamentals have peaked

Shares of Robert Half International Inc. sank Thursday to the lowest levels seen in more than a year, after BofA Securities reversed to a bearish stance on the staffing services company, amid concerns over a slowing jobs market.

Analyst Heather Balsky lowered her rating on Robert Half by two notches, to underperform from buy, as she believes “fundamentals have peaked.” Balsky sees “downside risk” to the shares as slowing sales hurt margins, and lead to a lower earnings.

She slashed her stock price target to $67 from $133, with the new target implying about 11% downside from Thursday’s closing price of $75.08

The stock

slumped 6.3% to close Thursday at the lowest close since March 2021. It has plunged 39.7% since the Feb. 9 record close of $124.53, compared with S&P 500 index’s

17.3% decline over the same time.

“While the labor market is still tight, there are signs of easing and we expect further loosening as rates rise and GDP [gross domestic product] slows,” Balsky wrote in a note to clients.

Don’t miss: U.S. adds 390,000 jobs in May and shows economy is still at cruising speed.

Also read: Unemployment claims dip but red-hot U.S. labor market might be cooling off.

Balsky cut her estimate for 2022 earnings per share by 4% to $6.34 and her 2023 EPS estimate by 27% to $5.36, to reflect a lower sales and margin outlook. She said there is risk of further cuts to her estimate if the economy and labor demand weakens more than anticipated.

Meanwhile, the number of employed Americans aged 16 years and older reached a seasonally adjusted 17-month high of 158.46 million in March. It has declined slightly since, to 158.43 million in May.

While Balsky expects an economic downturn, she believes it will be “modest” when compared with the 2001-2002 and 2008-2009 recessions, given the support provided by the tight labor market.

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