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4 Service Firms Poised to Beat Estimates This Earnings Season
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The Zacks Business Services sector has had a strong first quarter of 2024, driven by an improving strong demand for services, improving supply chains and strong digital adoption. However, labor market constraints and contracting economic activity in the manufacturing sector remained headwinds.
Per the latest Earnings Trend report, earnings of S&P 500 members of the business services sector that have reported results this season grew 14.6% year over year on 6.9% revenue growth, with 90.5% of the companies beating EPS estimates and 57.1% topping sales projections.
Total quarterly earnings of the S&P 500 members of the sector are currently anticipated to display 12.1% year-over-year growth. Revenues are likely to register a 5% rise.
A handful of companies from the sector, like Arm Holdings plc (ARM - Free Report) , AppLovin Corporation (APP - Free Report) , Maximus, Inc. (MMS - Free Report) and Envestnet, Inc. (ENV - Free Report) , are expected to beat estimates in the ongoing reporting cycle.
Let us discuss the factors that are likely to have played a key role in shaping the performance of business services companies in the quarter.
Factors Influencing Q1 Results
With service activities in the pink, the demand for business services rose steadily in the quarter. The Services PMI, measured by the Institute for Supply Management, had stayed above the 50% mark for 15 consecutive months by the end of the first quarter.
Sector-specific factors that acted as tailwinds in the quarter are the essentiality of certain services like waste management, the rise in demand for risk mitigation and consulting services, increased expertise in improving operational efficiency and lower costs and digital transformation.
Services pertaining to health care & social assistance, professional, scientific & technical, finance & insurance, accommodation & food, utilities, retail trade and educational services stayed healthy.
Stocks Poised to Beat This Season
With the existence of several players in the sector, finding the right business services stocks that have the potential to beat on earnings can be daunting. Our proprietary methodology, however, makes it fairly simple.
You could narrow down the list of choices by looking at stocks that have the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP is our proprietary methodology for determining stocks that have the best chances to surprise in their next earnings announcement. It is the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate.
Our research shows that for stocks with this combination, the chance of an earnings surprise is as high as 70%.
Here are our picks.
Arm Holdings: The company develops and licenses central processing unit products and related technologies for semiconductor companies and original equipment manufacturers.
AppLovin: The company develops a software-based platform for advertisers to enhance the marketing and monetization of their content in the United States and internationally. APP is scheduled to post its first-quarter 2024 results on May 8. It has an Earnings ESP of +2.66% and currently carries a Zacks Rank of 3.
The Zacks Consensus Estimate for the company’s revenues in the to-be-reported quarter is pegged at $970 million, indicating a rise of more than 35.6% from the year-ago quarter. The consensus mark for earnings is pegged at 57 cents per share, suggesting a rise of more than 100% from the year-ago quarter.
Maximus: The company is a provider of government services in the United States and internationally.MMS is scheduled to report its second-quarter fiscal 2024 results on May 8. It has an Earnings ESP of +1.53% and a Zacks Rank of 2.
The Zacks Consensus Estimate for the company’s revenues in the to-be-reported quarter is pegged at $1.3 billion, implying year-over-year growth of 6%. For earnings, the consensus mark is pegged at $1.3 per share, suggesting a 63.8% rise from the year-ago quarter’s actual.
Envestnet: The company offers wealth management software and services globally. ENV is scheduled to post its first-quarter 2024 results on May 7. It has an Earnings ESP of +1.23% and currently sports a Zacks Rank of 3.
The Zacks Consensus Estimate for the company’s revenues in the to-be-reported quarter is pegged at $324.9 million, indicating a rise of more than 8.8% from the year-ago quarter. The consensus mark for earnings is pegged at 54 cents per share, suggesting a rise of more than 17.4% from the year-ago quarter.
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4 Service Firms Poised to Beat Estimates This Earnings Season
The Zacks Business Services sector has had a strong first quarter of 2024, driven by an improving strong demand for services, improving supply chains and strong digital adoption. However, labor market constraints and contracting economic activity in the manufacturing sector remained headwinds.
Per the latest Earnings Trend report, earnings of S&P 500 members of the business services sector that have reported results this season grew 14.6% year over year on 6.9% revenue growth, with 90.5% of the companies beating EPS estimates and 57.1% topping sales projections.
Total quarterly earnings of the S&P 500 members of the sector are currently anticipated to display 12.1% year-over-year growth. Revenues are likely to register a 5% rise.
A handful of companies from the sector, like Arm Holdings plc (ARM - Free Report) , AppLovin Corporation (APP - Free Report) , Maximus, Inc. (MMS - Free Report) and Envestnet, Inc. (ENV - Free Report) , are expected to beat estimates in the ongoing reporting cycle.
Let us discuss the factors that are likely to have played a key role in shaping the performance of business services companies in the quarter.
Factors Influencing Q1 Results
With service activities in the pink, the demand for business services rose steadily in the quarter. The Services PMI, measured by the Institute for Supply Management, had stayed above the 50% mark for 15 consecutive months by the end of the first quarter.
Sector-specific factors that acted as tailwinds in the quarter are the essentiality of certain services like waste management, the rise in demand for risk mitigation and consulting services, increased expertise in improving operational efficiency and lower costs and digital transformation.
Services pertaining to health care & social assistance, professional, scientific & technical, finance & insurance, accommodation & food, utilities, retail trade and educational services stayed healthy.
Stocks Poised to Beat This Season
With the existence of several players in the sector, finding the right business services stocks that have the potential to beat on earnings can be daunting. Our proprietary methodology, however, makes it fairly simple.
You could narrow down the list of choices by looking at stocks that have the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP is our proprietary methodology for determining stocks that have the best chances to surprise in their next earnings announcement. It is the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate.
Our research shows that for stocks with this combination, the chance of an earnings surprise is as high as 70%.
Here are our picks.
Arm Holdings: The company develops and licenses central processing unit products and related technologies for semiconductor companies and original equipment manufacturers.
ARM is scheduled to report its fourth-quarter fiscal 2024 results on May 8. It has an Earnings ESP of +5.26% and currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
ARM Holdings PLC Sponsored ADR Price and EPS Surprise
ARM Holdings PLC Sponsored ADR price-eps-surprise | ARM Holdings PLC Sponsored ADR Quote
AppLovin: The company develops a software-based platform for advertisers to enhance the marketing and monetization of their content in the United States and internationally. APP is scheduled to post its first-quarter 2024 results on May 8. It has an Earnings ESP of +2.66% and currently carries a Zacks Rank of 3.
The Zacks Consensus Estimate for the company’s revenues in the to-be-reported quarter is pegged at $970 million, indicating a rise of more than 35.6% from the year-ago quarter. The consensus mark for earnings is pegged at 57 cents per share, suggesting a rise of more than 100% from the year-ago quarter.
AppLovin Corporation Price and EPS Surprise
AppLovin Corporation price-eps-surprise | AppLovin Corporation Quote
Maximus: The company is a provider of government services in the United States and internationally.MMS is scheduled to report its second-quarter fiscal 2024 results on May 8. It has an Earnings ESP of +1.53% and a Zacks Rank of 2.
The Zacks Consensus Estimate for the company’s revenues in the to-be-reported quarter is pegged at $1.3 billion, implying year-over-year growth of 6%. For earnings, the consensus mark is pegged at $1.3 per share, suggesting a 63.8% rise from the year-ago quarter’s actual.
Maximus, Inc. Price and EPS Surprise
Maximus, Inc. price-eps-surprise | Maximus, Inc. Quote
Envestnet: The company offers wealth management software and services globally. ENV is scheduled to post its first-quarter 2024 results on May 7. It has an Earnings ESP of +1.23% and currently sports a Zacks Rank of 3.
The Zacks Consensus Estimate for the company’s revenues in the to-be-reported quarter is pegged at $324.9 million, indicating a rise of more than 8.8% from the year-ago quarter. The consensus mark for earnings is pegged at 54 cents per share, suggesting a rise of more than 17.4% from the year-ago quarter.
Envestnet, Inc Price and EPS Surprise
Envestnet, Inc price-eps-surprise | Envestnet, Inc Quote