Four Business Services Stocks Poised To Beat Earnings Estimates

The Zacks Business Services sector offers a wide array of services such as staffing, consulting, advertising and marketing, outsourcing, technology, financial transaction, waste removal, business information, and auction and valuation.

The sector has outperformed the Zacks S&P 500 composite over the past year. The sector has gained 0.9% against the S&P 500’s decrease of 6.5% in the said time frame.

What’s Going in Favor of the Sector?

Trump administration’s business-friendly approach, including tax cuts and higher government spending, have kept manufacturing and non-manufacturing activities in good shape, thereby spurring demand for business services.

The Purchasing Managers' Index (PMI) measured by the Institute of Supply Management (ISM) touched 54.1% in December, indicating better economic activity in the manufacturing sector. This marks the 28th consecutive month of manufacturing growth. Also, December was the 107th straight month of growth in non-manufacturing activities, with ISM-measured Non-Manufacturing Index (NMI) touching 57.6%.

What’s in Store for the Sector This Earnings Season?

Per the latest Earnings Preview report, total earnings for the business services sector are expected to be up 10.0% on 4.4% higher revenues. Additionally, the sector is one of the eight (out of the total 16) Zacks sectors expected to register double-digit earnings growth in fourth-quarter 2018.

The primary growth drivers include a healthy economy with decent prospects of job growth, higher disposable income and new business initiatives. An ideal mix of services, effective marketing strategies and the ability to retain and attract new customers is expected to boost profits of sector players.

Given the forecast, it might be a good idea to zero in on some business services stocks that are poised to beat earnings estimates this quarter. An earnings surprise is likely to lead to outperformance in shares.

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Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this ...

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