VOLT Jolts Wall Street's Staff Infection - TheStreet

Wall Street seems to have a staff infection this week. Staffing services companies are suddenly a hot story--but arguably the best bet of them all,

Volt Information Sciences

(VOLT:Nasdaq), has been quietly ignored by the big-time analysts.

Perhaps Wall Street big shots won't cover the $1 billion dollar company because Volt doesn't give them any investment banking business. The last time Volt needed a deal,

Drexel's

Michael Milken did it.

Or perhaps Wall Street can't figure out why an extremely successful temp company is involved in so many cockamamie businesses: the computers that provide directory assistance for NYNEX and other telephone companies ("What City? What Listing?"); plant engineering and infrastructure for telecommunications companies; pre-press operations for newspapers; the printing of phone books in Uruguay, Brazil, Argentina and Paraguay.

Short of printing money, says analyst Chad Brown of

Prime Charter LTD

, a small New York brokerage, Volt's diversification couldn't have worked out better. "Volt is the most undervalued way to play the temporary staffing industry boom," says Brown. "And they're also a well-positioned play on the developing telecommunications wars. Basically they're in

two

of the right places at the right time."

Volt CFO James J. Groberg is more blunt. "We're in both because both are damn good businesses for making money," says Groberg. "They both feed each other. Basically we're in two major industries that are doing quite well."

Groberg says the company will have no problem meeting its predicted earnings of 85 cents per share for fourth quarter 1996, compared with 80 cents per share in last year's fourth quarter.

(A previous version of this story reported the per-share earnings as annual figures.)

Volt, he adds, will also show a one time 17 to 18 cent windfall from a Federal tax refund.

But here's the hot tip: Volt expects a big surprise out of Brazil for the first quarter of fiscal 1997. "We expected our Brazillian telephone directory business to earn a profit this year for the first time," says Groberg. "But the Brazilian telephone company

Brazil's Telecomunicacoes Brasileiras

(TBR:NYSE) changed a couple 100,000 numbers, so they delayed the printing from October to November." That means that the forthcoming earnings announcement from Volt, even if it beats its number from last year, doesn't truly reflect how much their business has improved in 1996.

Brown, who rates Volt a buy, lowered his earnings estimate for fiscal 97 because of the delay, but his '98 estimate of $5 per share is unchanged.

Volt closed today at 37 1/2, up 1/2.

Volt is one of the leading suppliers of temporary workers for

Microsoft

(MSFT:Nasdaq) and is one of the top ten staffing companies in the business. Prime Charter reports that staffing companies trade at an average 1997 price-to-earnings ratio of 19.2. But Volt--which earns 60% of its revenues from staffing--is trading at a 1997 P/E of just 11, a 40% discount.

The telecommunications business, of course, is growing faster than a fungus, particularly the new personal communications systems business. And Volt has a strong business in designing and building PCS systems.

"I think a lot of people on the Street don't follow us because we're not a pure play," says Groberg. Maybe that's precisely why they should.

By Cory Johnson