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5 Business Services Stocks Flying High Amid Recession Fears
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U.S. stock markets are set to close February on a negative note with just a day of trading left. The welcome rally from the first week of January to mid-February has evaporated completely. This is because inflation remained stubborn in January, raising fears that the Fed needs to pursue tighter monetary policies longer than expected to reach its 2% inflation target.
A rigorous hike in interest rate with tighter monetary control is likely to result in a recession. Despite this headwind, several business services stocks are likely to provide solid returns in 2023. A handful of them with a favorable Zacks Rank are flying high with more upside left.
Inflation Remains a Serious Concern
Sticky inflation compelled the Fed to hike the benchmark interest rate by 4.25% last year. However, a gradual decline in the various measures of inflation in the last three months of 2022 raised market participants’ expectations of lesser rate hikes as peak inflation was behind us.
On Feb 1, in its February FOMC meeting, the Fed also reduced the magnitude of the interest rate hike by 25 basis points to the range of 4.50% to 4.75%. At the beginning, investors were expecting a maximum of three more rate hikes in 2023 of 25 basis points each.
However, the sudden surge in inflation in January changed the whole scenario. Market participants now expect the central bank to raise interest rate by at least 1% in 2023 with the possibility of another 50-basis point hike in the March FOMC meeting.
Business Services Sector Holds Ground
The staffing industry comprises companies that provide a wide range of services related to human resources, and workforce solutions and services. Of late, the industry has been witnessing growth in revenues and income. The fundamentals of the U.S. economy remain firm leading to huge hiring and wage increase.
The staffing industry stands to benefit from the gradual resumption of business activities, which were postponed or restricted by the coronavirus-triggered strict lockdowns worldwide. This led to additional hiring and wage increase.
As the global economy is recovering from the pandemic, the key focus within the consulting industry is currently on channelizing money and efforts toward more effective operational components, such as technology, digital transformation and data-driven decision-making.
Growth in the technology services industry has increased the number of remote workers in the wake of the pandemic. In this era of digital transformation, enterprises are actively seeking a common ground between on-premise and cloud infrastructure that will enable them to provide flexible and easy-to-adopt hybrid solutions.
The business software industry is benefiting from robust demand for multi-cloud-enabled software solutions, given the ongoing transition from legacy platforms to modern cloud-based infrastructure.
The industry players are incorporating artificial intelligence and tools like machine learning in their applications to make the same more dynamic and result-oriented. Elevated demand for enterprise software, which is ramping up productivity and improving the decision-making process, is a key catalyst.
Our Top Picks
We have narrowed our search to five business services stocks that have strong growth potential for 2023. These stocks have seen positive earnings estimate revisions in the past 30 days. These stocks have provided double-digit returns year to date. Each of our picks carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performance of our five picks year to date.
Image Source: Zacks Investment Research
HireQuest Inc. (HQI - Free Report) provides temporary staffing solutions in the United States. HQI provides temporary staffing services, including skilled and semi-skilled labor and industrial personnel, clerical and administrative personnel, and construction personnel. In addition, HireQuest specializes in commercial drivers.
HQI serves customers primarily in the construction, industrial/manufacturing, warehousing, hospitality, recycling/waste management, disaster recovery, logistics, auctioneering, construction, landscaping, and retail industries.
HireQuest has an expected revenue and earnings growth rate of 29.4% and 35.9%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 11.6% over the past 30 days. The stock price of HQI has jumped 44.1% year to date.
IBEX Ltd. (IBEX - Free Report) provides end-to-end technology-enabled customer lifecycle experience solutions in the United States and internationally. IBEX offers customer support, technical support, inbound and outbound sales, business intelligence and analytics, digital demand generation and CX surveys and feedback analytics service. Its major products are ibex Connect, ibex Digital and ibex CX.
IBEX has an expected revenue and earnings growth rate of 11.6% and 29.6%, respectively, for the current year (ending June 2023). The Zacks Consensus Estimate for current-year earnings has improved 16.3% over the past 30 days. The stock price of IBEX has advanced 11.1% year to date.
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. SPSC delivers its solutions over the Internet using a Software-as-a-Service model to improve the way suppliers, retailers, distributors and other customers manage and fulfill orders.
SPS Commerce’s delivery model also enables it to offer greater functionality, integration and reliability with less cost and risk than traditional solutions. SPSC provides solutions through SPSCommerce.net, a hosted software. SPSCommerce.net uses pre-built integrations to eliminate the need for on-premise software and support staff, which enables its supplier customers to shorten supply cycle times, optimize inventory levels, reduce costs and satisfy retailer requirements.
SPS Commerce has an expected revenue and earnings growth rate of 16.5% and 13.2%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 9.9% over the past 30 days. The stock price of SPSC has surged 15% year to date.
Diebold Nixdorf Inc. (DBD - Free Report) provides connected commerce. DBD’s integrated solutions connect digital and physical channels conveniently, securely and efficiently. DBD operates principally in Western Europe, Eastern Europe, Asia, the Middle East, Africa, the United States, Canada, Mexico and Latin America.
Diebold Nixdorf has an expected revenue and earnings growth rate of 11.1% and more than 100%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 18.4% over the past 30 days. The stock price of DBD has soared 111.9% year to date.
Inspired Entertainment Inc. (INSE - Free Report) is a business-to-business gaming technology company, supplying content, platform, and other products and services to regulated lottery, betting, and gaming operators worldwide. INSE operates through four segments: Gaming, Virtual Sports, Interactive, and Leisure.
Inspired Entertainment has an expected revenue and earnings growth rate of 15.1% and 31.1%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 6.2% over the past 60 days. The stock price of INSE has climbed 22.4% year to date.
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5 Business Services Stocks Flying High Amid Recession Fears
U.S. stock markets are set to close February on a negative note with just a day of trading left. The welcome rally from the first week of January to mid-February has evaporated completely. This is because inflation remained stubborn in January, raising fears that the Fed needs to pursue tighter monetary policies longer than expected to reach its 2% inflation target.
A rigorous hike in interest rate with tighter monetary control is likely to result in a recession. Despite this headwind, several business services stocks are likely to provide solid returns in 2023. A handful of them with a favorable Zacks Rank are flying high with more upside left.
Inflation Remains a Serious Concern
Sticky inflation compelled the Fed to hike the benchmark interest rate by 4.25% last year. However, a gradual decline in the various measures of inflation in the last three months of 2022 raised market participants’ expectations of lesser rate hikes as peak inflation was behind us.
On Feb 1, in its February FOMC meeting, the Fed also reduced the magnitude of the interest rate hike by 25 basis points to the range of 4.50% to 4.75%. At the beginning, investors were expecting a maximum of three more rate hikes in 2023 of 25 basis points each.
However, the sudden surge in inflation in January changed the whole scenario. Market participants now expect the central bank to raise interest rate by at least 1% in 2023 with the possibility of another 50-basis point hike in the March FOMC meeting.
Business Services Sector Holds Ground
The staffing industry comprises companies that provide a wide range of services related to human resources, and workforce solutions and services. Of late, the industry has been witnessing growth in revenues and income. The fundamentals of the U.S. economy remain firm leading to huge hiring and wage increase.
The staffing industry stands to benefit from the gradual resumption of business activities, which were postponed or restricted by the coronavirus-triggered strict lockdowns worldwide. This led to additional hiring and wage increase.
As the global economy is recovering from the pandemic, the key focus within the consulting industry is currently on channelizing money and efforts toward more effective operational components, such as technology, digital transformation and data-driven decision-making.
Growth in the technology services industry has increased the number of remote workers in the wake of the pandemic. In this era of digital transformation, enterprises are actively seeking a common ground between on-premise and cloud infrastructure that will enable them to provide flexible and easy-to-adopt hybrid solutions.
The business software industry is benefiting from robust demand for multi-cloud-enabled software solutions, given the ongoing transition from legacy platforms to modern cloud-based infrastructure.
The industry players are incorporating artificial intelligence and tools like machine learning in their applications to make the same more dynamic and result-oriented. Elevated demand for enterprise software, which is ramping up productivity and improving the decision-making process, is a key catalyst.
Our Top Picks
We have narrowed our search to five business services stocks that have strong growth potential for 2023. These stocks have seen positive earnings estimate revisions in the past 30 days. These stocks have provided double-digit returns year to date. Each of our picks carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performance of our five picks year to date.
Image Source: Zacks Investment Research
HireQuest Inc. (HQI - Free Report) provides temporary staffing solutions in the United States. HQI provides temporary staffing services, including skilled and semi-skilled labor and industrial personnel, clerical and administrative personnel, and construction personnel. In addition, HireQuest specializes in commercial drivers.
HQI serves customers primarily in the construction, industrial/manufacturing, warehousing, hospitality, recycling/waste management, disaster recovery, logistics, auctioneering, construction, landscaping, and retail industries.
HireQuest has an expected revenue and earnings growth rate of 29.4% and 35.9%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 11.6% over the past 30 days. The stock price of HQI has jumped 44.1% year to date.
IBEX Ltd. (IBEX - Free Report) provides end-to-end technology-enabled customer lifecycle experience solutions in the United States and internationally. IBEX offers customer support, technical support, inbound and outbound sales, business intelligence and analytics, digital demand generation and CX surveys and feedback analytics service. Its major products are ibex Connect, ibex Digital and ibex CX.
IBEX has an expected revenue and earnings growth rate of 11.6% and 29.6%, respectively, for the current year (ending June 2023). The Zacks Consensus Estimate for current-year earnings has improved 16.3% over the past 30 days. The stock price of IBEX has advanced 11.1% year to date.
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. SPSC delivers its solutions over the Internet using a Software-as-a-Service model to improve the way suppliers, retailers, distributors and other customers manage and fulfill orders.
SPS Commerce’s delivery model also enables it to offer greater functionality, integration and reliability with less cost and risk than traditional solutions. SPSC provides solutions through SPSCommerce.net, a hosted software. SPSCommerce.net uses pre-built integrations to eliminate the need for on-premise software and support staff, which enables its supplier customers to shorten supply cycle times, optimize inventory levels, reduce costs and satisfy retailer requirements.
SPS Commerce has an expected revenue and earnings growth rate of 16.5% and 13.2%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 9.9% over the past 30 days. The stock price of SPSC has surged 15% year to date.
Diebold Nixdorf Inc. (DBD - Free Report) provides connected commerce. DBD’s integrated solutions connect digital and physical channels conveniently, securely and efficiently. DBD operates principally in Western Europe, Eastern Europe, Asia, the Middle East, Africa, the United States, Canada, Mexico and Latin America.
Diebold Nixdorf has an expected revenue and earnings growth rate of 11.1% and more than 100%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 18.4% over the past 30 days. The stock price of DBD has soared 111.9% year to date.
Inspired Entertainment Inc. (INSE - Free Report) is a business-to-business gaming technology company, supplying content, platform, and other products and services to regulated lottery, betting, and gaming operators worldwide. INSE operates through four segments: Gaming, Virtual Sports, Interactive, and Leisure.
Inspired Entertainment has an expected revenue and earnings growth rate of 15.1% and 31.1%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 6.2% over the past 60 days. The stock price of INSE has climbed 22.4% year to date.