Ahead Of The Bell: Staffing Sector

HARTFORD, Conn. (AP) — The weak dollar and anemic economies overseas could undermine staffing companies' second-quarter earnings, an analyst said Tuesday.

A weak dollar is usually good news for multinational staffing companies because it increases the value of revenue and profits overseas, analyst Ty Govatos of CL King and Associates wrote in a note to investors.

"However, a weak dollar will also magnify losses and in the current environment many staffing multinationals are posting red ink abroad," he said.

The second quarter for most staffing companies is usually marked by a seasonal upturn, but an upturn now could be more than offset by rapidly deteriorating economies overseas, Govatos said.

"The difference between red ink and profitability will likely depend on the speed and depth of cost-cutting efforts vs. the rate of foreign deterioration and the geographic mix of business," he said.

Companies that posted near break-even results in the first quarter are in danger of recording a foreign loss in the second quarter, he said.