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Services Activity Expands to Record High in July: 5 Winners

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The services sector has been doing well ever since the economy reopened and has been maintaining a steady pace despite increasing inflationary pressure and renewed fears of the COVID-19 Delta variant. The expansion continued in July, with the index hitting an all-time high.

Although people spent more on core capital goods, the services sector was one of the beneficiaries of the pandemiclast year. Things started looking even betterwith the turn of the year as the economy started to rebound. The services sector is poised to perform well in the coming days too.

Services Sector Continues to Grow

The Institute for Supply Management (ISM) said on Aug 4 that its non-manufacturing (service) purchasing managers’ index (PMI) hit an all-time high of 64.1% in July compared to 60.1% in June. The consensus estimate was 60.5%. Any reading above 50% means expansion in services activities.

This is also the 14th straight month of growth. Also, the services sector has now expanded in 136 of the last 138 months. The Supplier Deliveries Index jumped to 72% in July from 68.5% in June.

The Business Activity Index increased 6.6% to reach to 67% in July, while the New Orders Index gained 1.6% to reach 63.7%. The Employment Index jumped to 53.8%.

Services Sector Grows as Economy Reopens

The services sector had contracted 41.8% and 45.4% in April and May 2020, respectively, but has bounced back since then and is growing faster than ever.

As more people worked and learnt from home during the pandemic, they became technology-dependent, giving a boost to tech services. The economic reopening is finally helping the services sector and is poised to grow further.

The economic reopening saw people making travel plans, eating out at restaurants as well as visiting stores and recreation joints. This is further boosting the services sector. The growth comes despite mounting inflationary pressure and fears of a resurgence in COVID-19 cases.

However, with millions of people now vaccinated they are at the same time confident, which is helping the services sector. Business services are only likely to increase in the coming months as more people get vaccinated. This will only help people get back their confidence and help business services to grow.

Our Choices 

The services sector is poised to grow on vaccination and more purchasing power from the government stimulus. Given this situation, it would be ideal to invest in these four stocks.

Avis Budget Group, Inc. (CAR - Free Report) operates as a leading vehicle rental operator in North America, Europe and Australasia with an average rental fleet of nearly 650,000 vehicles.

The company’s expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings improved 54.2% over the past 60 days. Avis Budget sports a Zacks Rank #1 (Strong Buy).You can see the complete list of today’s Zacks #1 Rank stocks here.

TransUnion (TRU - Free Report) is one of the leading global providers of risk and information solutions to businesses and consumers. The company provides consumer reports, risk scores, analytical services and decisioning capabilities to businesses.

The company recently announced that it has developed a new Credit Industry Indicator (CII) to assess and summarize the health of Canada’s consumer credit market.

The company’s expected earnings growth rate for the current year is 23%. The Zacks Consensus Estimate for current-year earnings improved 3.4% over the past 60 days. TransUnion carries a Zacks Rank #2 (Buy).

Sirius XM Holdings Inc. (SIRI - Free Report) creates and broadcasts a variety of content such as commercial-free music, premier sports and live events, news, and comedy and exclusive talk and entertainment shows. Sirius XM provides radio services to users in the United States and Canada.

The company recently launched its Platinum VIP Package, which allows subscribers full access to SiriusXM content in up to two cars, which includes two streaming logins.

The company’s expected earnings growth rate for the current year is 20%. The Zacks Consensus Estimate for current-year earnings improved 25% over the past 60 days. Sirius XM Holdingscarries a Zacks Rank #2.

Volt Information Sciences, Inc. (VOLT - Free Report) is a leading national provider of Staffing Services and Telecommunications and Information Solutions with a Fortune hundred customer base. In June, the company was named by Forbes as a Best Temporary Staffing Firm for the second consecutive year.

The company’s expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings improved 31.6% over the past 60 days. Volt Information carries a Zacks Rank #2.

SPS Commerce, Inc. (SPSC - Free Report) is a provider of on-demand supply chain management solutions, providing integration, collaboration, connectivity, visibility and data analytics to its customers worldwide. The company's delivery model also enables it to offer greater functionality, integration and reliability with less cost and risk than traditional solutions.

The company’s expected earnings growth rate for the current year is 11.8%. The Zacks Consensus Estimate for current-year earnings improved 2.4% over the past 60 days. SPS Commerce has a Zacks Rank #2.