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3 Service Firms Poised to Beat Estimates This Earnings Season
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The Zacks Business Services sector has had a strong third quarter of 2023, driven by an improving global macroeconomic environment, 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 12.1% year over year on 6.9% revenue growth, with 78.9% of the companies beating EPS estimates and 68.4% topping sales projections.
Total quarterly earnings of the S&P 500 members of the sector are currently anticipated to display 9.1% year-on-year growth. Revenues are likely to register a 6.9% rise.
A handful of companies from the sector, like National CineMedia, Inc. (NCMI - Free Report) , AirSculpt Technologies, Inc. (AIRS - Free Report) and Duolingo, Inc. (DUOL - 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 Q3 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 4.9% in the third quarter compared with 2.1% growth in the second quarter.
With service activities in the pink, the demand for business services rose steadily. The Services PMI, measured by the Institute for Supply Management, had stayed above the 50% mark for nine consecutive months by the end of the third 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, successful work-from-home models and digital transformation.
Services pertaining to retail trade, mining, utilities, construction, health care & social assistance, finance & insurance, information, educational services, professional, scientific & technical services and transportation & warehousing 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 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.
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.
National CineMedia: The company operates a cinema advertising network.
The Zacks Consensus Estimate for NCMI’s top line in the to-be-reported quarter is pegged at $61.05 million, indicating year-over-year growth of 12%. The consensus mark for the bottom line is pegged at a loss of 14 cents, indicating a contraction in loss by 89.2% on a year-over-year basis.
AirSculpt Technologies: The company operates as a holding company for EBS Intermediate Parent LLC that offers body contouring procedure services.
AirSculpt is scheduled to report its third-quarter 2023 results on Nov 10. It has an Earnings ESP of +11.11% and currently carries a Zacks Rank #2.
The consensus mark for revenues in the to-be-reported quarter is pegged at $46.55 million, indicating year-over-year growth of 19.7%. The consensus mark for the bottom line is pegged at 9 cents, indicating an increase of more than 100% on a year-over-year basis.
AirSculpt Technologies, Inc. Price and EPS Surprise
Duolingo: The company operates a mobile learning platform.
DUOL is scheduled to report its third-quarter 2023 results on Nov 8. It has an Earnings ESP of +35.90% and currently carries a Zacks Rank #3.
The consensus mark for revenues in the to-be-reported quarter is pegged at $131.41 million, indicating year-over-year growth of 36.8%. The consensus mark for the bottom line is pegged at a loss of 8 cents, indicating a contraction in loss by 89.6% on a year-over-year basis.
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3 Service Firms Poised to Beat Estimates This Earnings Season
The Zacks Business Services sector has had a strong third quarter of 2023, driven by an improving global macroeconomic environment, 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 12.1% year over year on 6.9% revenue growth, with 78.9% of the companies beating EPS estimates and 68.4% topping sales projections.
Total quarterly earnings of the S&P 500 members of the sector are currently anticipated to display 9.1% year-on-year growth. Revenues are likely to register a 6.9% rise.
A handful of companies from the sector, like National CineMedia, Inc. (NCMI - Free Report) , AirSculpt Technologies, Inc. (AIRS - Free Report) and Duolingo, Inc. (DUOL - 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 Q3 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 4.9% in the third quarter compared with 2.1% growth in the second quarter.
With service activities in the pink, the demand for business services rose steadily. The Services PMI, measured by the Institute for Supply Management, had stayed above the 50% mark for nine consecutive months by the end of the third 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, successful work-from-home models and digital transformation.
Services pertaining to retail trade, mining, utilities, construction, health care & social assistance, finance & insurance, information, educational services, professional, scientific & technical services and transportation & warehousing 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 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.
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.
National CineMedia: The company operates a cinema advertising network.
National CineMedia is set to report its third-quarter 2023 results on Nov 7. It has an Earnings ESP of +114.29% and currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for NCMI’s top line in the to-be-reported quarter is pegged at $61.05 million, indicating year-over-year growth of 12%. The consensus mark for the bottom line is pegged at a loss of 14 cents, indicating a contraction in loss by 89.2% on a year-over-year basis.
National CineMedia, Inc. Price and EPS Surprise
National CineMedia, Inc. price-eps-surprise | National CineMedia, Inc. Quote
AirSculpt Technologies: The company operates as a holding company for EBS Intermediate Parent LLC that offers body contouring procedure services.
AirSculpt is scheduled to report its third-quarter 2023 results on Nov 10. It has an Earnings ESP of +11.11% and currently carries a Zacks Rank #2.
The consensus mark for revenues in the to-be-reported quarter is pegged at $46.55 million, indicating year-over-year growth of 19.7%. The consensus mark for the bottom line is pegged at 9 cents, indicating an increase of more than 100% on a year-over-year basis.
AirSculpt Technologies, Inc. Price and EPS Surprise
AirSculpt Technologies, Inc. price-eps-surprise | AirSculpt Technologies, Inc. Quote
Duolingo: The company operates a mobile learning platform.
DUOL is scheduled to report its third-quarter 2023 results on Nov 8. It has an Earnings ESP of +35.90% and currently carries a Zacks Rank #3.
The consensus mark for revenues in the to-be-reported quarter is pegged at $131.41 million, indicating year-over-year growth of 36.8%. The consensus mark for the bottom line is pegged at a loss of 8 cents, indicating a contraction in loss by 89.6% on a year-over-year basis.
Duolingo, Inc. Price and EPS Surprise
Duolingo, Inc. price-eps-surprise | Duolingo, Inc. Quote