Monster ( MWW ) recently announced its Q2 earnings results. Consistent with our preview note on Monster , the company witnessed solid growth in its career services business that expanded 28% over last year. The increase is due to multiple factors, including a complete integration with Yahoo's ( YHOO ) HotJobs, solid international growth and indications of increased hiring in the U.S. The company's Achilles' heel remains its Internet advertising & fees business, which has posted revenues that are relatively flat over the last year owing to reduced lead generation and a decline in military recruitment . We also want to see more convincing evidence that Monster is benefiting from the uptick in the N. America business as profit margins suffered in this area vs. last year comparables. Monster competes in the online job search market with niche players like careerbuilder.com and jobcentral.com and faces growing competition from social networks like LinkedIn ( LNKD ), Facebook and Craigslist.
We currently maintain a near $13 price estimate for Monster stock , which is about 10% above the current market price. The revised price includes adjustments made to our forecasts for EBITDA margin and page views of Monster's website as well as changes to the company's net cash/debt position.
International Career Services Shows Strength
The major winner for this quarter was the international segment of Monster's core career services business, which saw an increase of revenue growth of 30%. The increase in site traffic through Yahoo's HotJobs is a major contributor to this increase. The EBITDA margin for the international business grew to 15.5% in Q2 from 2.8% a year ago.
Revenues also grew organically as Monster launched its Power Resume Search ( PRS ) tool in Germany. Going forward, we expect further growth in international markets as Yahoo traffic is further directed towards Monster. This should be further aided by Monster's new portfolio of tools to counter competition from social networks, such as Monster's Facebook app BeKnown. ((Monster Launches First Truly Global Professional Networking App for Facebook with Introduction of BeKnown, press release, June 27th, 2011)) We thus expect to see some significant upside in job listings for international career services for Q3 and Q4, which should lead to division revenues in the +$460 million bracket for this division.
However to win investors' confidence the company will need to do more to show that its core U.S. business can scale and maintain its profit margins. Despite solid 26% revenue growth for N. America, its operating profit was down 8.3% (though EBITDA was up 5%).