Back to top

Non-Manufacturing Clocks 99th Month of Growth: 4 Solid Picks

Read MoreHide Full Article

Economic activity in the non-manufacturing sector expanded in April as the NMI measured by The Institute of Supply Management (ISM) touched 56.81%. This was the 99th straight month of expansion with all 18 non-manufacturing industries reporting growth. Any reading above 50 indicates that the said sector is expanding.

April NMI was lower than the consensus estimates of 58.1% and the March figure of 58.8%. The slowdown was mainly due to trade war worries that made suppliers across the globe nervous. Trump’s decision to postpone the imposition of steel and aluminum tariffs has somewhat eased such concerns.

Business Activity, New Orders & Employment Rise

The ISM Business Activity Index registered growth of 59.1% in April, growing for the 105th consecutive month. All the 15 industries reported an increase in business activity for April driven by strength in overall business activity.

The index for New Orders jumped to 60% in the month, marking the 87th straight month of increase and that too at an accelerated rate compared with March. The surge was driven by large clients onboarding or existing clients adding new work.

Employment Index surged to 53.6%, expanding for the 50th month on the trot. While the economy continued to create new jobs, a tight labor market compelled companies to pay higher to attract and retain employees.

The Service Sector Stands to Gain

The long streak of expansion indicates that the broader economy is on track for steady growth this year. The non-manufacturing sector accounts for nearly 90% of the economy. The business services sector is gaining strength because it is firmly tied to non-manufacturing activities and the broader economy. Healthy economic growth leads to higher corporate profits.

Top 4 Gainers

Given the promising developments in the service sector, investors may consider buying sound stocks from the space. We have selected four stocks that should make meaningful additions to your portfolio. These stocks carry a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The search was narrowed down by taking into consideration stocks with a VGM Score of A or B. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three metrics. Such a score allows one to eliminate the negative aspects of stocks and select winners.

Based in New Jersey, Avis Budget Group, Inc. (CAR - Free Report) is a vehicle rental service provider.

Avis Budget has a Zacks Rank #1 and a VGM Score of A. The company has expected earnings growth rate of 90% and 26.3%, respectively, for the current quarter and year.

The Zacks Consensus Estimate for the current quarter improved 3.6% to 57 cents per share over the last 30 days. For the current year, the consensus estimate moved up 9.4% to $3.60.

The company’s impressive earnings surprise history is noteworthy. It surpassed the consensus estimate in three of the previous four quarters, delivering an average positive surprise of 35.4%.

Avis Budget Group, Inc. Revenue (TTM)

Based in Houston, Cardtronics plc (CATM - Free Report) is a provider of automated consumer financial services through ATMs and multi-function financial services kiosks.

Cardtronics has a Zacks Rank #1 and a VGM Score of A. The Zacks Consensus Estimate for the current quarter moved up 2.7% to 38 cents per share over the last 30 days. For the current year, the consensus estimate moved up 7.4% to $1.59.

The company has an impressive earnings surprise history, having surpassed the consensus estimate in all the previous four quarters, with an average positive surprise of 21.2%.

Cardtronics PLC Revenue (TTM)

Based in Texas, BG Staffing, Inc. (BGSF - Free Report) is a national provider of temporary staffing services across a diverse set of industries.

BG Staffing has a Zacks Rank #2 and a VGM Score of A. The company has expected earnings growth rate of 24% and 33.7%, respectively, for the current quarter and year.

The Zacks Consensus Estimate for the current quarter remained stagnant at 31 cents per share over the last 30 days. For the current year, the consensus estimate moved up 3.1% to $1.35 in the same time frame.

The company surpassed the consensus estimate in three of the previous four quarters, delivering an average positive surprise of 29.9%.

BG Staffing Inc Revenue (TTM)

Based in Florida, Kforce, Inc. (KFRC - Free Report) is a professional staffing services firm.

Kforce has a Zacks Rank #2 and a VGM Score of B. The company has expected earnings growth rate of 45.5% and 40.1%, respectively, for the current quarter and year.

The Zacks Consensus Estimate for the current quarter improved 4.9% to 64 cents per share over the last 30 days. For the current year, the consensus estimate moved up 3.3% to $2.20.

The company’s earnings surpassed the consensus estimate in two of the previous four quarters, delivering an average positive surprise of 0.8%.

More Stock News: This Is Bigger than the iPhone!

It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.

Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.

Click here for the 6 trades >>



More from Zacks Analyst Blog

You May Like