The second-quarter earnings season is in full swing, with 381 S&P 500 companies (collectively accounting for 82.7% of the index’s total market capitalization) having already reported their quarterly numbers as of Aug 2. Per the latest Earnings Preview, total earnings of these 381 companies increased 25% from the same period last year on 10.4% higher revenues, with 80.1% beating EPS estimates and 73.8% beating revenue estimates.
Per the above report, the bottom and the top lines (in the S&P 500 Index) are likely to improve 23.9% and 9.3%, respectively at the end of the current reporting cycle. In fact, of the 16 Zacks sectors, 14 are anticipated to end the second-quarter reporting cycle with double-digit earnings growth. One of them is the Zacks Business Services sector. On a year-over-year basis, earnings and revenues from this sector are anticipated to increase 22.8% and 6.7%, respectively.
The outlook for the business services sector is highly dependent on the health of the broader economy, which is currently quite favorable. The U.S. economy is benefiting from Trump administration’s business-friendly approach, including tax cuts, higher spending and repeal of regulations. This has improved the employment scenario and aided manufacturing and non-manufacturing activities.
The business services sector has also performed well compared with the benchmark index year to date. The sector has gained 10.6%, which compares favorably with the Zacks S&P 500 Composite’s rally of 6.5% in the said time frame.
Key Releases on Aug 7
Given this bullish backdrop, investors interested in the business services stocks can watch out for four companies that are scheduled to report their respective quarterly numbers on Aug 7.
According to the Zacks model, a company needs the right combination of two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better — to increase the odds of an earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
We do not recommend Zacks Rank #4 (Sell) or 5 (Strong Sell) stocks going into the earnings announcement, especially if they have a negative Earnings ESP.
Based in New York, Broadridge Financial Solutions, Inc. (BR - Free Report) is a provider of technology-based outsourcing solutions. The company will release fourth-quarter fiscal 2018 results.
The Zacks Consensus Estimate for revenues in the to-be reported quarter is pegged at $1.33 billion, indicating a decline of 1.42% on a year-over-year basis. The downside is likely to be caused by a significant fall in event-driven revenues. The company expects event-driven revenues to decline 30-40% in the upcoming quarterly release.
The consensus estimate for earnings per share is pegged at $1.88, indicating year-over-year growth of 9.9%. Strong operations and the 2017 tax reform policy (Tax Cuts and Jobs Act) are likely to boost the company’s bottom line. However, increased investments in digital, AI, cloud and blockchain are likely to partially offset bottom-line growth. (Read more: Will Tax Cut Aid Broadridge Financial in Q4 Earnings?)
Broadridge has an impressive earnings surprise history, having surpassed estimates in three of the trailing four quarters, with an average positive surprise of 23.6%.
However, the company has a Zacks Rank #4 and an Earnings ESP of +0.44%.
New Jersey based Avis Budget Group, Inc. (CAR - Free Report) , a leading provider of vehicle rental services, will report second-quarter 2018 results.
The Zacks Consensus Estimate for second-quarter revenues is pegged at $2.39 billion, implying year-over-year growth of 6.7%. The expected improvement is likely to be driven by higher leisure volumes at the Americas segment and increased commercial volume at the International segment. EMEA and Asia Pacific regions are expected to witness strong growth. (Read more: Avis Budget Earnings to Reflect Volume Growth in Q2)
The consensus mark for earnings stands at 55 cents per share, indicating year-over-year growth of 83.3%. The bottom line will see positive seasonality effect as demand remains high during spring and summer vacations across majority of the countries in which Avis Budget operates. Operational efficiency and fleet cost optimization are also likely to boost bottom-line performance.
Avis Budget boasts an attractive earnings surprise history, having surpassed estimates in three of the trailing four quarters, with an average positive surprise of 35.4%.
The company has a Zacks Rank #3 and an Earnings ESP of -6.42%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Based in New York, Genpact Limited (G - Free Report) manages business processes for companies around the world. It will report second-quarter 2018 results.
The Zacks Consensus Estimate for second-quarter revenues is pegged at $734.5 million, indicating year-over-year growth of 9.5%. The top line is likely to be driven by solid growth across global client revenues and global client BPO revenues. The company is also optimistic about the growth opportunities from Transformation Services and Intelligent Operations.
The consensus mark for earnings stands at 40 cents per share, indicating year-over-year decline of 6.9%. The bottom line is likely to be adversely impacted by seasonality effect as demand for services like short-term IT projects, transformation, analytics, collections and transaction processing services is lower in the first half of the year. Operational efficiency is however likely to act as a tailwind.
Genpact has an impressive earnings surprise history, having surpassed estimates in each of the trailing four quarters, with an average positive surprise of 11.2%.
The company has a Zacks Rank #3 and an Earnings ESP of -0.83%.
Based in Georgia, GreenSky, Inc. (GSKY - Free Report) , a financial technology company, will release second-quarter 2018 results.
The Zacks Consensus Estimate for revenues and earnings is pegged at $105.57 million and 16 cents per share, respectively, for the to-be reported quarter. The company’s Zacks Rank #3 and Earnings ESP of +1.27% makes us reasonably confident of an earnings beat.
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