Morgan Stanley has reshuffled its recommendations for major European staffing companies, warning that improving trends in temporary work have not erased mounting risks to permanent recruitment. In a note, analysts led by Remi Grenu pointed to an increasingly uncertain macroeconomic and geopolitical backdrop as a driver of those concerns.
The team said the sector has shown recent organic growth improvements that were largely driven by temporary staffing. However, that progress has been offset by worries around gross margins, operating leverage and a medium-term threat from artificial intelligence.
Ratings and price-target moves
Morgan Stanley downgraded Adecco from Equal-weight to Underweight and trimmed its price target to SFr 15 from SFr 20.50. At the same time, the bank upgraded Randstad to Equal-weight from Underweight and set a slightly lower target of c25.50.
Market reaction was observable: Adecco shares slipped 1.6 percent by 09:17 GMT on the downgrade.
The analysts said their preference for Randstad reflects the companys lower financial leverage and a reduced risk of shareholder dilution compared with Adecco. Adeccos net debt-to-EBITDA ratio was 2.7 times at the end of 2025, versus 1.3 times for Randstad. The team estimated that even assuming a full-cash dividend scenario, Adecco would not hit a 1.5 times leverage target until 2029, which is two years later than the companys stated goal.
Specialist staffing names
Among specialist recruiters, Morgan Stanley upgraded Hays to Equal-weight from Underweight while reducing its price target to 35 pence from 44 pence. Page Group kept an Underweight rating, but saw its target cut sharply to 110 pence from 195 pence.
The analysts noted the differing business mixes between the two. Page Group derives 72 percent of its gross profit from permanent placement, compared with 38 percent at Hays. That higher exposure to permanent hiring makes Page Group, in Morgan Stanleys view, more vulnerable under the prevailing conditions of geopolitical, macroeconomic and energy-price uncertainty.
Cash flow and dividend risks
The note also flagged a risk of a further dividend cut across the sector, citing thin coverage by free cash flow as a concern. The analysts used deteriorating job-posting and vacancy data across France, Germany, the U.K. and the U.S. as evidence that demand for permanent roles remains weak.
Adeccos first-quarter update, which led to a 17 percent drop in its share price, was described in the note as "a wake-up call for the market." Looking ahead, Morgan Stanley said it sees limited positive catalysts for staffing names to re-rate over the coming earnings season.
AI exposure and labour market trends
The bank revisited its analysis of how AI is influencing the labour market. Morgan Stanley observed that employment growth in occupations it classifies as AI-disrupted has underperformed roles judged to be AI-protected for three consecutive years, reversing a pattern that prevailed from 2016 to 2022.
Recent stock performance
Staffing stocks under Morgan Stanleys coverage have reportedly fallen by roughly 40 percent on average over the past 12 months. Within that group, Hays and Page Group have declined approximately 50-55 percent, while Adecco and Randstad have each fallen by around 25 percent.
In sum, Morgan Stanleys note adjusts investor expectations across the staffing sector by elevating concerns about permanent hiring demand, margin pressure, leverage trajectories and AI-related risks, and by rebalancing exposure toward companies with stronger balance-sheet positions.