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2 Service Firms Poised to Beat Estimates This Earnings Season
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The Zacks Business Services sector had a strong second quarter of 2023, driven by an improving global macroeconomic environment, strong demand for services, improving supply chains, a less-hawkish stance from the U.S. Federal Reserve, and strong digital adoption. However, labor market constraints and higher operational expenses 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 6.1% year over year on 5.6% revenue growth, with 70.4% of the companies beating EPS estimates and 66.7% topping sales projections.
Total quarterly earnings of the S&P 500 members of the sector are currently anticipated to display 6.1% year-on-year growth. Revenues are likely to indicate a 5.6% rise.
A handful of companies from the sector, like DLocal Limited (DLO - Free Report) and Gambling.com Group Limited (GAMB - 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 Q2 Results
The sector is a major beneficiary of the broader economy and service activities. According to the "advance" estimate released by the Bureau of Economic Analysis, GDP grew at an annual rate of 2.4% in the second quarter of 2023 compared with 2% growth in the first quarter. Fed’s decision to pause interest rate hike in June after ten straight increases also offered relief to the global economy.
Economic activities in the non-manufacturing sector were in good shape in the quarter. The Services PMI measured by the Institute for Supply Management has stayed above the 50% mark for the past seven months, indicating continued expansion.
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, successful work-from-home models and digital transformation.
Services pertaining to transportation & warehousing; accommodation & food; utilities; construction; rental & leasing; health care & social assistance; education; information; professional, scientific & technicalstayed healthy in the quarter.
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 Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), and a positive Earnings ESP. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter. You can see the complete list of today’s Zacks #1 Rank stocks here.
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.
DLocal Limited: The company operates a payment processing platform globally.
DLocal is set to report its second-quarter 2023 results on Aug 15. It has an Earnings ESP of +12.50% and currently carries a Zacks Rank #3. The Zacks Consensus Estimate for the to-be-reported quarter has remained unchanged in the past 60 days.
The consensus mark for the top line in the to-be-reported quarter is pegged at $151.2 million, indicating year-over-year growth of 49.4%. The consensus mark for the bottom line is pegged at 13 cents, indicating an increase of 30% on a year-over-year basis.
Gambling.com: The company is a leading provider of player acquisition services for the regulated global online gambling industry.
Gambling.comis scheduled to report its second-quarter 2023 results on Aug 17. It has an Earnings ESP of +3.45% and currently carries a Zacks Rank #3. The Zacks Consensus Estimate for the to-be-reported quarter has moved 9.1% north in the past 60 days.
The consensus mark for revenues in the to-be-reported quarter is pegged at $21.9 million, indicating year-over-year growth of 37.4%. The consensus mark for the bottom line is pegged at 12 cents, indicating an increase of 33.3% on a year-over-year basis.
Image: Bigstock
2 Service Firms Poised to Beat Estimates This Earnings Season
The Zacks Business Services sector had a strong second quarter of 2023, driven by an improving global macroeconomic environment, strong demand for services, improving supply chains, a less-hawkish stance from the U.S. Federal Reserve, and strong digital adoption. However, labor market constraints and higher operational expenses 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 6.1% year over year on 5.6% revenue growth, with 70.4% of the companies beating EPS estimates and 66.7% topping sales projections.
Total quarterly earnings of the S&P 500 members of the sector are currently anticipated to display 6.1% year-on-year growth. Revenues are likely to indicate a 5.6% rise.
A handful of companies from the sector, like DLocal Limited (DLO - Free Report) and Gambling.com Group Limited (GAMB - 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 Q2 Results
The sector is a major beneficiary of the broader economy and service activities. According to the "advance" estimate released by the Bureau of Economic Analysis, GDP grew at an annual rate of 2.4% in the second quarter of 2023 compared with 2% growth in the first quarter. Fed’s decision to pause interest rate hike in June after ten straight increases also offered relief to the global economy.
Economic activities in the non-manufacturing sector were in good shape in the quarter. The Services PMI measured by the Institute for Supply Management has stayed above the 50% mark for the past seven months, indicating continued expansion.
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, successful work-from-home models and digital transformation.
Services pertaining to transportation & warehousing; accommodation & food; utilities; construction; rental & leasing; health care & social assistance; education; information; professional, scientific & technicalstayed healthy in the quarter.
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 Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), and a positive Earnings ESP. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter. You can see the complete list of today’s Zacks #1 Rank stocks here.
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.
DLocal Limited: The company operates a payment processing platform globally.
DLocal is set to report its second-quarter 2023 results on Aug 15. It has an Earnings ESP of +12.50% and currently carries a Zacks Rank #3. The Zacks Consensus Estimate for the to-be-reported quarter has remained unchanged in the past 60 days.
The consensus mark for the top line in the to-be-reported quarter is pegged at $151.2 million, indicating year-over-year growth of 49.4%. The consensus mark for the bottom line is pegged at 13 cents, indicating an increase of 30% on a year-over-year basis.
DLocal Limited Price and EPS Surprise
DLocal Limited price-eps-surprise | DLocal Limited Quote
Gambling.com: The company is a leading provider of player acquisition services for the regulated global online gambling industry.
Gambling.comis scheduled to report its second-quarter 2023 results on Aug 17. It has an Earnings ESP of +3.45% and currently carries a Zacks Rank #3. The Zacks Consensus Estimate for the to-be-reported quarter has moved 9.1% north in the past 60 days.
The consensus mark for revenues in the to-be-reported quarter is pegged at $21.9 million, indicating year-over-year growth of 37.4%. The consensus mark for the bottom line is pegged at 12 cents, indicating an increase of 33.3% on a year-over-year basis.
Gambling.com Group Limited Price and EPS Surprise
Gambling.com Group Limited price-eps-surprise | Gambling.com Group Limited Quote