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5 Stocks to Buy on Robust ISM Services Index in January
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The U.S. services sector is finally regaining the lost ground as inflation shows signs of easing. Consumer confidence is high and people are again spending lavishly as they believe the economy will have a softer landing than expected earlier.
Given this situation, business services stocks like Affirm Holdings, Inc. (AFRM - Free Report) , WNS (Holdings) Limited (WNS - Free Report) , Vertiv Holdings Co (VRT - Free Report) , Science Applications International Corporation (SAIC - Free Report) and Booz Allen Hamilton Holding Corporation (BAH - Free Report) are likely to benefit in the near term.
Services Activity Expands
The Institute for Supply Management (ISM) reported on Feb 5 that activity in the services sector grew at a solid pace in January, with the Purchasing Managers’ Index (PMI) jumping to 53.4, reflecting an increase of 2.9% from December’s reading of 50.5 and beating analysts’ expectations of 52.0.
The services sector accounts for two-thirds of the economy and a reading above 50 indicates growth in the industry. This is also the 13 straight month of increase in the services sector.
The Business Activity Index remained unchanged at 55.8% in January. Most importantly, the New Orders Index expanded to 55% last month, up 2.2% from the seasonally adjusted December reading of 52.8% and marking the 13th straight month of expansion.
The Supplier Deliveries Index rose to 52.4% in January, increasing 2.9% from December’s reading of 49.5%. The Employment Index jumped to 50.5% last month, increasing a solid 6.9% from the seasonally adjusted December figure of 43.8%.
The robust January jobs data proves that services activity was, to a great extent, driven by the labor market as hiring was robust across industries.
The services industry suffered a setback during the peak of the pandemic, but activity picked up after lockdowns were lifted. However, the growth slowed as inflationary pressures saw the Federal Reserve adopt a strict monetary tightening policy. The Fed raised interest rates by 5252 basis points since March 2022 to take its benchmark policy rate to the range of 5.25-5.50%.
However, the Fed left interest rates unchanged in its past four FOMC meetings and has indicated rate cuts this year. Lower interest rates will allow people to spend more, which in the near term, should boost the services industry.
Affirm Holdings, Inc. is an emerging growth company. AFRM is building the next-generation platform for digital and mobile-first commerce. They believe they can reinvent the payment experience. Their platform comprises three core elements: a point-of-sale payment solution for consumers, merchant commerce solutions, and a consumer-focused app.
Affirm Holdings’ expected earnings growth rate for the current year is 117.4%. The Zacks Consensus Estimate for current-year earnings has improved 26.1% over the past 60 days. AFRM currently has a Zacks Rank #2.
WNS (Holdings) Limited is a recognized leader in business process outsourcing. WNS delivers value to its clients by bringing operational excellence and deep industry and functional knowledge to their critical business processes. WNS (Holdings) Limited serves several industries, including travel, insurance, financial services, healthcare, professional services, manufacturing, distribution and retail.
The company’s expected earnings growth rate for the current year is 12.4%. The Zacks Consensus Estimate for current-year earnings has improved 4.6% over the past 60 days. WNS presently carries a Zacks Rank #2.
Vertiv Holdings Co provides digital infrastructure and continuity solutions. VRT offers hardware, software, analytics and ongoing services.
Vertiv Holdings’ expected earnings growth rate for the current year is 228.3%. The Zacks Consensus Estimate for current-year earnings has improved 1.2% over the past 60 days. VRT presently has a Zacks Rank #2.
Science Applications International Corporation is one of the leading information technology ("IT") and professional services providers, primarily to the U.S. government. SAIC offers transaction, technical, engineering and enterprise IT services primarily to the U.S. government.
Science Applications International Corporation’s expected earnings growth rate for the current year is 4.4%. The Zacks Consensus Estimate for current-year earnings has improved 0.9% over the past 60 days. SAIC presently has a Zacks Rank #2.
Booz Allen Hamilton Holding Corporation is a provider of management and technology consulting, analytics, engineering, digital solutions, mission operations as well as cyber expertise to the United States and international governments, corporations plus not-for-profit organizations. BAH operates as a single profit center with a single bonus pool for partners, vice presidents, principals and senior associates.
Booz Allen Hamilton Holding Corporation’s expected earnings growth rate for the current year is 14.9%. The Zacks Consensus Estimate for current-year earnings has improved 4.4% over the past 60 days. BAH presently sports a Zacks Rank #1.
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5 Stocks to Buy on Robust ISM Services Index in January
The U.S. services sector is finally regaining the lost ground as inflation shows signs of easing. Consumer confidence is high and people are again spending lavishly as they believe the economy will have a softer landing than expected earlier.
Given this situation, business services stocks like Affirm Holdings, Inc. (AFRM - Free Report) , WNS (Holdings) Limited (WNS - Free Report) , Vertiv Holdings Co (VRT - Free Report) , Science Applications International Corporation (SAIC - Free Report) and Booz Allen Hamilton Holding Corporation (BAH - Free Report) are likely to benefit in the near term.
Services Activity Expands
The Institute for Supply Management (ISM) reported on Feb 5 that activity in the services sector grew at a solid pace in January, with the Purchasing Managers’ Index (PMI) jumping to 53.4, reflecting an increase of 2.9% from December’s reading of 50.5 and beating analysts’ expectations of 52.0.
The services sector accounts for two-thirds of the economy and a reading above 50 indicates growth in the industry. This is also the 13 straight month of increase in the services sector.
The Business Activity Index remained unchanged at 55.8% in January. Most importantly, the New Orders Index expanded to 55% last month, up 2.2% from the seasonally adjusted December reading of 52.8% and marking the 13th straight month of expansion.
The Supplier Deliveries Index rose to 52.4% in January, increasing 2.9% from December’s reading of 49.5%. The Employment Index jumped to 50.5% last month, increasing a solid 6.9% from the seasonally adjusted December figure of 43.8%.
The robust January jobs data proves that services activity was, to a great extent, driven by the labor market as hiring was robust across industries.
The services industry suffered a setback during the peak of the pandemic, but activity picked up after lockdowns were lifted. However, the growth slowed as inflationary pressures saw the Federal Reserve adopt a strict monetary tightening policy. The Fed raised interest rates by 5252 basis points since March 2022 to take its benchmark policy rate to the range of 5.25-5.50%.
However, the Fed left interest rates unchanged in its past four FOMC meetings and has indicated rate cuts this year. Lower interest rates will allow people to spend more, which in the near term, should boost the services industry.
Our Choices
Given this situation, it would be ideal to invest in business services stocks. Each of these stocks carries a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Affirm Holdings, Inc. is an emerging growth company. AFRM is building the next-generation platform for digital and mobile-first commerce. They believe they can reinvent the payment experience. Their platform comprises three core elements: a point-of-sale payment solution for consumers, merchant commerce solutions, and a consumer-focused app.
Affirm Holdings’ expected earnings growth rate for the current year is 117.4%. The Zacks Consensus Estimate for current-year earnings has improved 26.1% over the past 60 days. AFRM currently has a Zacks Rank #2.
WNS (Holdings) Limited is a recognized leader in business process outsourcing. WNS delivers value to its clients by bringing operational excellence and deep industry and functional knowledge to their critical business processes. WNS (Holdings) Limited serves several industries, including travel, insurance, financial services, healthcare, professional services, manufacturing, distribution and retail.
The company’s expected earnings growth rate for the current year is 12.4%. The Zacks Consensus Estimate for current-year earnings has improved 4.6% over the past 60 days. WNS presently carries a Zacks Rank #2.
Vertiv Holdings Co provides digital infrastructure and continuity solutions. VRT offers hardware, software, analytics and ongoing services.
Vertiv Holdings’ expected earnings growth rate for the current year is 228.3%. The Zacks Consensus Estimate for current-year earnings has improved 1.2% over the past 60 days. VRT presently has a Zacks Rank #2.
Science Applications International Corporation is one of the leading information technology ("IT") and professional services providers, primarily to the U.S. government. SAIC offers transaction, technical, engineering and enterprise IT services primarily to the U.S. government.
Science Applications International Corporation’s expected earnings growth rate for the current year is 4.4%. The Zacks Consensus Estimate for current-year earnings has improved 0.9% over the past 60 days. SAIC presently has a Zacks Rank #2.
Booz Allen Hamilton Holding Corporation is a provider of management and technology consulting, analytics, engineering, digital solutions, mission operations as well as cyber expertise to the United States and international governments, corporations plus not-for-profit organizations. BAH operates as a single profit center with a single bonus pool for partners, vice presidents, principals and senior associates.
Booz Allen Hamilton Holding Corporation’s expected earnings growth rate for the current year is 14.9%. The Zacks Consensus Estimate for current-year earnings has improved 4.4% over the past 60 days. BAH presently sports a Zacks Rank #1.