Investing.com -- Goldman Sachs (NYSE:GS) analysts have revised their outlook on Adecco (SIX:ADEN) Group, upgrading the staffing giant to a "buy" rating and increasing the 12-month price target to SFr 42 from SFr 27.42, in a note dated Friday.
This upward revision is rooted in Adecco’s recent performance and promising indicators for the near future.
The analysts at Goldman Sachs observed that Adecco’s full-year results revealed early first-quarter exit rates that demonstrated improvement compared to the fourth quarter of 2024, with organic growth showing a positive shift from -5%.
This detail, according to Goldman Sachs, sets Adecco apart from its competitors. While peers like RAND reported exit rate trends mirroring the less favorable fourth-quarter figures, Adecco appears to be benefiting from strong execution, enabling the company to secure key contracts, notably in the United States.
Despite acknowledging the prevailing macroeconomic uncertainties, such as the potential ramifications of US tariffs and the still-developing cyclical recovery in the European Union, Goldman Sachs flags an interesting dynamic.
They suggest that such uncertainty can actually be advantageous for temporary recruitment. Companies tend to favor temporary workers during periods of economic growth coupled with uncertainty, shifting towards permanent hires only when GDP stabilizes.
Goldman Sachs anticipates that factors like the fiscal stimulus package in Germany and increased defense spending across Europe will contribute to a cyclical recovery that will benefit Adecco.
The current valuation of Adecco’s shares, trading below mid-cycle levels, is seen by Goldman Sachs as presenting an attractive investment opportunity.
Goldman Sachs’s analysis of staffing data reveals a mixed picture, with France showing some signs of recovery in February, while the Netherlands and the U.S. continue to exhibit declines or worsening trends.
However, Adecco’s improved exit rates in early Q1 are attributed to self-help measures and superior execution compared to its rivals.
Management’s commentary on major contract wins within the U.S. food and beverage sector has fueled optimism about a return to positive organic growth for Adecco’s U.S. business in the first half of 2025.
Furthermore, the SME business in the region has already achieved positive organic growth in Q4, a stark contrast to RAND’s -7% in Q4 2024.
Goldman Sachs forecasts a 3% organic growth decline for Adecco in Q1 2025, with the Adecco unit experiencing an approximate 2% decline, offset somewhat by ongoing weakness in Akkodis.
The brokerage projects Q1 EBITA to be €121 million, with a modest increase in gross margins expected. Adecco’s shares are currently trading at around 10 times the estimated 2025 P/E and 0.3 times EV/sales, which Goldman Sachs believes understates the potential for a near-term inflection to positive organic growth.
With Q1 results due on May 8, 2025, market focus is expected to be on exit rate commentary, with Goldman Sachs anticipating improved group organic growth in Q2.