KELY.A: Future Upside Will Stem From Higher-Margin Specialty Staffing Mix

Analysts have reduced their price target on Kelly Services to $16 from $25, citing weaker than expected Q2 results, a Q3 shortfall, and a soft Q4 outlook, even as they continue to view the shares as significantly undervalued relative to peers.

Analyst Commentary

Analysts remain divided on Kelly Services, balancing a structurally more attractive business mix with near term execution and macro headwinds. The latest target cut underscores increasing caution on earnings visibility despite continued support for the long term story.

Overall, commentary points to a company that is strategically better positioned but still needs to prove out consistent growth and margin expansion in a challenging labor and demand environment.

Bullish Takeaways

• Bullish analysts highlight Kelly Services ongoing strategic transformation toward faster growing, higher margin specialty staffing and workforce solutions, which they believe should support structurally higher profitability over time.
• The company is viewed as significantly undervalued, with shares trading at a substantial discount to other publicly traded staffing peers. This suggests meaningful upside if it can narrow the valuation gap.
• Management engagement with investors and clearer articulation of the transformation strategy are seen as positives for improving confidence in execution and the long term growth algorithm.
• Despite the reduced price target, some bullish analysts maintain positive ratings. They argue that the current share price already discounts a conservative outlook for near term earnings.

Bearish Takeaways

• Bearish analysts point to the recent Q2 earnings miss as evidence that execution has not yet fully caught up with the company strategic ambitions, increasing uncertainty around near term earnings power.
• The cited Q3 shortfall and soft Q4 outlook heighten concerns about demand sensitivity to macroeconomic dynamics, particularly in cyclical staffing end markets.
• There is caution that, until revenue growth reaccelerates and margins visibly improve, the discount valuation may persist, limiting re rating potential in the short term.
• Some bearish analysts question how quickly the transformation can translate into consistent, above peer growth and profitability, given the mixed recent track record and macro backdrop.

What's in the News

• Issued fourth quarter 2025 guidance calling for a total year-over-year revenue decline of 12% to 14%, with about 8% of the drop tied to reduced demand from federal contractors and discrete large customers (company guidance).
• Underlying revenue is expected to decline 4% to 6% in the fourth quarter of 2025, pressured by tough comparisons to strong growth in the prior year and a modest impact from the government shutdown (company guidance).
• Reported no share repurchases between June 30, 2025 and September 28, 2025, while confirming completion of 742,163 shares repurchased for $10.02 million under the buyback program launched December 3, 2024 (buyback update).

Valuation Changes

• Fair Value: Unchanged at approximately $17.67 per share, indicating no revision to intrinsic value estimates.
• Discount Rate: Fallen slightly from about 8.26% to 8.18%, reflecting a modest reduction in perceived risk or required return.
• Revenue Growth: Essentially unchanged at around negative 0.38%, signaling a stable outlook for modest top line contraction.
• Net Profit Margin: Effectively flat at roughly 3.71%, suggesting no meaningful change in long term profitability assumptions.
• Future P/E: Edged down marginally from about 5.01x to 5.00x, implying a slightly lower multiple applied to projected earnings.