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Kelly Services (KELYA)
NASDAQ:KELYA

Kelly Services (KELYA) AI Stock Analysis

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Kelly Services

(NASDAQ:KELYA)

Rating:54Neutral
Price Target:
$12.00
▲(0.76%Upside)
The overall score reflects financial challenges with negative profitability and unattractive valuation. However, strategic initiatives and potential margin expansion provide some optimism. Mixed technical indicators and earnings call sentiment suggest cautious outlook.
Positive Factors
Market Position
Kelly continued to gain market share and outperform the broader industry.
Revenue Performance
Kelly reported solid Q1/25 revenue of $1.165 billion that exceeded the consensus of $1.158 billion.
Segment Growth
Professional & Industrial segment revenue grew 4.4% year-over-year, reflecting continued traction of the segment’s omni-channel strategy.
Negative Factors
Earnings
Q1/25 adjusted EPS of $0.39 declined from $0.56 in the year-ago quarter due primarily to a $0.15 per share increase in net interest expense.
Government Demand
Reduced demand from the federal government due to spending cutbacks was an 80 basis point headwind to organic revenue growth in Q1/25.
IT Staffing Demand
Demand for IT staffing remained challenged, consistent with industry trends, as clients continued to take a cautious approach to initiating large technology deployments.

Kelly Services (KELYA) vs. SPDR S&P 500 ETF (SPY)

Kelly Services Business Overview & Revenue Model

Company DescriptionKelly Services, Inc. (KELYA) is a global leader in workforce solutions, offering a comprehensive range of outsourcing and consulting services as well as staffing on a temporary, temporary-to-hire, and direct-hire basis. The company operates across multiple sectors, including education, engineering, science, IT, and office functions, providing specialized talent solutions to meet the evolving needs of businesses worldwide. With a strong focus on innovation and customer-centric approaches, Kelly Services is dedicated to connecting skilled professionals with leading organizations to enhance workforce efficiency and productivity.
How the Company Makes MoneyKelly Services generates revenue primarily through the provision of staffing and workforce solutions. The company earns money by placing temporary, temporary-to-hire, and permanent employees across various industries, charging clients for these placements. Revenue streams include fees from temporary staffing services, where Kelly charges clients a markup on the wages paid to temporary workers, and fees from direct-hire placements, where clients pay a percentage of the hired employee's first-year salary. Additionally, Kelly Services offers outsourcing and consulting services, providing human resource management and project-based services, which contribute to its revenue. Partnerships with companies and organizations seeking flexible workforce solutions also play a significant role in enhancing the company's earnings, as do its investments in technology and innovation to streamline operations and improve client and candidate experiences.

Kelly Services Earnings Call Summary

Earnings Call Date:May 08, 2025
(Q1-2025)
|
% Change Since: 5.21%|
Next Earnings Date:Aug 07, 2025
Earnings Call Sentiment Neutral
The earnings call highlighted some positive developments, such as revenue growth, improved gross profit rate, and strong performance in the education segment. However, significant challenges included reduced demand for federal contractors, high integration costs, and a decline in earnings per share and EBITDA margin. The sentiment of the call is mixed with equal focus on growth and challenges.
Q1-2025 Updates
Positive Updates
Revenue Growth
Revenue for the first quarter of 2025 totaled $1.16 billion, an increase of 11.5% versus Q1 last year. On an organic basis, year-over-year revenue was up 0.2%.
Education Segment Performance
The education segment was up 6.6% year-over-year, with ongoing fill rate improvement and higher bill rates.
Improved Gross Profit Rate
Gross profit was $236.5 million, with a gross profit rate of 20.3%, an improvement of 60 basis points compared to the prior year quarter.
Integration and Efficiency Initiatives
Integration of Motion Recruitment Partners and unification of OCG and P&I business units expected to drive efficiencies and synergies.
Semiconductor and Renewable Sectors
Strong demand for higher margin outcome-based solutions within semiconductor and renewable sectors.
Negative Updates
Federal Contractor Demand Decline
A 0.8% negative impact on overall revenue due to reduced demand for federal contractors, notably impacting the SET and ETM segments.
High Integration Costs
Integration charges of $10.7 million in the quarter, with ongoing charges expected due to IT and severance expenses.
Earnings Per Share Reduction
Reported earnings per share were $0.16 compared to $0.70 in Q1 2024. On an adjusted basis, earnings per share were $0.39 compared to $0.56 in the prior year.
Adjusted EBITDA Margin Decline
Adjusted EBITDA margin declined 20 basis points to 3%.
Company Guidance
In the first quarter of the fiscal year 2025, Kelly Services achieved an 11.5% increase in total revenue, reaching $1.16 billion, driven by solid performances in its Education and Science, Engineering, and Technology (SET) segments, alongside the integration of Motion Recruitment Partners (MRP). On an organic basis, revenue grew by 0.2%, despite a 0.8% negative impact from reduced demand for federal contractors. The company's gross profit stood at $236.5 million, with a gross profit rate of 20.3%, reflecting a 60-basis-point improvement over the prior year. Adjusted EBITDA increased by 5% to $34.9 million, although the adjusted EBITDA margin slightly declined by 20 basis points to 3%. Kelly Services anticipates second-quarter revenue growth of 6% to 7%, despite a 1% to 1.5% negative impact from the federal contractor demand reduction. The company expects adjusted EBITDA margin expansion in the latter half of the year, building on their efforts to streamline operations and integrate its acquisitions.

Kelly Services Financial Statement Overview

Summary
Kelly Services faces significant financial challenges, as evidenced by declining revenue, profitability, and cash flow. The company has increased its leverage, which, combined with negative income, raises concerns about financial stability. While the balance sheet reflects a stable equity position, the negative trends in income and cash flow highlight the need for strategic financial improvements to enhance profitability and liquidity.
Income Statement
45
Neutral
The income statement shows a declining trend in revenue and profitability over recent years. Gross profit margin is absent for the latest period, indicating potential issues in revenue generation or cost management. EBIT and EBITDA margins are negative, pointing to operational challenges. The net profit margin has also turned negative, reflecting operating losses. These factors collectively suggest declining financial performance and profitability.
Balance Sheet
55
Neutral
The balance sheet indicates a moderately leveraged position with a debt-to-equity ratio that has increased due to rising debt. The equity ratio is stable, suggesting a balanced asset structure. However, return on equity has suffered due to negative net income. The stability in stockholders' equity provides some assurance, but the increased leverage and negative profitability pose risks.
Cash Flow
60
Neutral
Cash flow analysis reveals a decrease in operating cash flow and free cash flow over time, indicating potential liquidity issues. The operating cash flow to net income ratio is positive, but the free cash flow to net income ratio is negative due to negative profits. Although financing activities have provided some cash inflow, the cash flow situation reflects potential liquidity and cash management challenges.
Breakdown
Dec 2024Dec 2023Mar 2023Mar 2022Mar 2021
Income StatementTotal Revenue
4.33B4.84B4.97B4.91B4.52B
Gross Profit
882.60M961.40M1.01B919.20M827.60M
EBIT
-15.10M24.30M142.20M48.60M137.60M
EBITDA
39.90M78.20M-13.40M241.10M-59.10M
Net Income Common Stockholders
-600.00K36.40M-63.30M156.10M-72.80M
Balance SheetCash, Cash Equivalents and Short-Term Investments
39.00M125.80M153.70M112.70M223.00M
Total Assets
2.63B2.58B2.66B2.89B2.56B
Total Debt
302.60M51.30M70.40M78.90M87.40M
Net Debt
263.60M-74.50M-83.30M-33.80M-135.60M
Total Liabilities
1.40B1.33B1.41B1.56B1.36B
Stockholders Equity
1.23B1.25B1.25B1.34B1.20B
Cash FlowFree Cash Flow
15.80M61.40M-88.30M73.80M170.50M
Operating Cash Flow
26.90M76.70M-76.30M85.00M186.00M
Investing Cash Flow
-361.60M-14.10M167.50M-180.70M9.80M
Financing Cash Flow
214.80M-59.60M-50.60M-8.10M-8.10M

Kelly Services Technical Analysis

Technical Analysis Sentiment
Positive
Last Price11.91
Price Trends
50DMA
11.84
Positive
100DMA
12.68
Negative
200DMA
15.08
Negative
Market Momentum
MACD
-0.03
Negative
RSI
54.21
Neutral
STOCH
65.23
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For KELYA, the sentiment is Positive. The current price of 11.91 is below the 20-day moving average (MA) of 11.97, above the 50-day MA of 11.84, and below the 200-day MA of 15.08, indicating a neutral trend. The MACD of -0.03 indicates Negative momentum. The RSI at 54.21 is Neutral, neither overbought nor oversold. The STOCH value of 65.23 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for KELYA.

Kelly Services Risk Analysis

Kelly Services disclosed 32 risk factors in its most recent earnings report. Kelly Services reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 2 New Risks
1.
We are subject to substantial pressure to meet external stakeholder's sustainability and ESG requirements. Q4, 2024
2.
Events such as natural disasters, severe weather, terrorist attacks, war, pandemics, and other catastrophic events could decrease demand for our services in impacted areas. Q4, 2024

Kelly Services Peers Comparison

Overall Rating
UnderperformOutperform
Sector (66)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
66
Neutral
$4.51B12.295.40%248.53%4.14%-12.41%
64
Neutral
$909.79M129.311.71%1.36%6.17%-85.16%
HQHQI
63
Neutral
$140.56M41.225.67%2.39%-7.66%-34.08%
MHMHH
61
Neutral
$76.59M37.262.52%3.93%
54
Neutral
$417.72M11.43-1.60%2.52%-3.49%-140.04%
TBTBI
54
Neutral
$193.82M-36.98%-16.76%-1127.93%
ZIZIP
49
Neutral
$580.65M225.24-2897.28%-20.95%-152.29%
* Industrials Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
KELYA
Kelly Services
12.06
-8.79
-42.16%
HSII
Heidrick & Struggles
44.30
11.22
33.92%
MHH
Mastech Holdings
6.59
-1.07
-13.97%
TBI
Trueblue
6.14
-4.37
-41.58%
HQI
HireQuest
10.14
-2.49
-19.71%
ZIP
ZipRecruiter
6.37
-3.16
-33.16%

Kelly Services Corporate Events

Business Operations and StrategyFinancial Disclosures
Kelly Services Unveils Strategic Initiatives and Growth Plan
Positive
May 22, 2025

On May 22, 2025, Kelly Services posted an investor presentation on its website, outlining its strategic initiatives and financial performance. The company has streamlined its operations to focus on higher-margin, higher-growth markets, resulting in a significant expansion of its EBITDA margin. Kelly Services has also realigned its business segments to enhance efficiency and effectiveness, aiming to capture shareholder value through its specialty growth strategy. The company has achieved structural savings and monetized non-core assets, positioning itself for long-term value creation for stakeholders.

The most recent analyst rating on (KELYA) stock is a Hold with a $29.00 price target. To see the full list of analyst forecasts on Kelly Services stock, see the KELYA Stock Forecast page.

Executive/Board ChangesShareholder MeetingsBusiness Operations and Strategy
Kelly Services Approves 2025 Equity Incentive Plan
Positive
May 9, 2025

On May 8, 2025, Kelly Services, Inc. held its annual stockholders meeting virtually, where the 2025 Equity Incentive Plan was approved. The meeting also saw the election of board members, approval of executive compensation, and ratification of PricewaterhouseCoopers LLP as the independent auditor for 2025, indicating strong shareholder support for the company’s strategic initiatives.

Executive/Board Changes
Kelly Services Announces Retirement of Chief Accounting Officer
Neutral
Mar 10, 2025

On March 6, 2025, Kelly Services announced that Laura Lockhart, Vice President, Chief Accounting Officer, and Corporate Controller, plans to retire by December 31, 2025, or earlier if a successor is appointed. Her retirement is not due to any disputes with the company, and she is expected to assist with the transition after her successor is appointed.

Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.