At the turn of the year, investors scour the market for potential opportunities that could develop into successful investments in the new stock market year. One possibility is the so-called "laggard trade", in which shares that performed poorly in the previous year switch to the fast lane in the new year. Adecco is high on the list of laggards. The shares of the recruitment agency fell by more than 40% in 2024, dropping to their lowest level since 1996.
Whether the SLI member's course is now set for a rebound in 2025 after almost three lost decades is likely to depend primarily on further fundamental developments. The operating business has recently come under noticeable pressure. The Zurich-based group is currently having to deal with a rapidly changing recruitment environment. Internet platforms and the increasing use of artificial intelligence are creating strong competition for the traditional business model. This is also reflected in Adecco's books: in the third quarter, revenue fell organically by 5% to EUR 5.7 billion, while operating profit (Ebita) adjusted for exceptional items slumped by a fifth to EUR 162 million.
The former growth story, which was also impacted by the coronavirus pandemic, has been lying dormant for years. In terms of sales, Adecco is currently at the same level as in 2018, and the company's Ebida is even a quarter lower than it was back then. And yet hope is gradually spreading that the negative trend may have come to an end in the final quarter of 2024. Adecco is forecasting comparable results to the previous quarter in terms of sales, gross margin and cost ratio. In addition, the Zurich-based company will be cutting costs even further in the future. General and administrative costs are to be reduced by EUR 171 million in the fourth quarter. Investors will find out whether CEO Denis Machuel and his team can keep their word at the next presentation of figures on February 26.
Things could then pick up again in 2025. Business is expected to pick up in the USA in particular. Recently, recruitment figures had slowed down as many employers held on to staff in the run-up to the presidential election and employees were reluctant to change jobs due to economic and political uncertainty. As a result, sales in North America slumped by 15% in the three months to September. "We firmly believe in the US economy," says Machuel optimistically. But it is not only on the other side of the Atlantic that Adecco has opportunities to return to growth. If the macroeconomic environment in the major European economies of Germany and France improves, the recent stabilization trend could continue. In Germany, government elections are also due in February, which could potentially provide further impetus.
The analysts at Vontobel see opportunities for Adecco in any case. The private bank has included the mid-cap in its elite circle of "Swiss equity favorites" for 2025. The experts are optimistic about the cost savings, which will have a positive impact on profitability. In addition, according to the institute, the improved cash flow trend is an important factor for "maintaining a progressive dividend". The analyst consensus also sees significant improvements on the earnings side. Accordingly, earnings per share are expected to improve by 13.4% this year and the pace of growth is set to increase again in 2026 (see chart). This results in a P/E ratio of 8.4 for 2025, with the much-noticed ratio even falling to 7.0 in 2026.
To achieve a double-digit percentage return with the new soft callable barrier reverse convertibles, the Adecco share does not have to rebound. With a maximum term of 18 months and a risk buffer of a comfortable 41%, an attractive return is possible even if the share price stagnates. The CHF variant offers an interest rate of 10.80% p.a., while the EUR-denominated product even has a coupon of 12.00% p.a.. A conditional coupon payment is also integrated. If Adecco is quoted above the trigger level of 59% of the starting price on the quarterly record date, the respective distribution is due. If the share does not meet this requirement, the product "remembers" the missed opportunity. As soon as the underlying reaches the specified hurdle on a later observation date, the issuer transfers the current coupon and makes up for missed distributions. For both products, a soft call observation occurs for the first time after 6 months.
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