The information technology (IT) services industry is undergoing a major transformation owing to the rapidly changing technology landscape. Rising demand for IT service solutions driven by the ongoing digital transformation is a key growth driver for industry players.
Notably, increasing digital deals are expected to be long-term revenue drivers for companies in this sector. Moreover, the evolution of automation on the back of increasing customer sentiment is instrumental in expanding their market opportunities.
We note that robust adoption of technologies, which enhance the digital workplace such as work-stream collaboration, workforce analytics and video message oriented middleware (MOM); security (endpoint detection and response), analytics (smart data discovery) and storage (in-memory data grids), is driving growth.
Moreover, increasing IT spending in sectors like healthcare, retail and transportation among others provides significant growth opportunities.
Per the latest report by Gartner, worldwide IT spending is projected to witness record growth this year. Notably, this will also mark the highest growth in a decade. Per the firm, global spending will reach $3.74 trillion in 2018, representing 6.2% increase from $3.52 billion recorded last year.
Notably, IT Services segment spending is predicted to be up 7.4% and reach $1 trillion in 2018.
Picking the Right Stocks
Notably, there are number of stocks in the IT services industry that are worth considering, given their strong fundamentals and robust growth prospects.
It is here that Zacks’ proprietary methodology comes in handy. We have picked stocks that have a VGM Score of A or B, which when combined with a Zacks Rank #1 (Strong Buy) or 2 (Buy), offer good investment opportunities.
Our research shows that stocks with such a favorable combination can handily beat other stocks. You can see the complete list of today’s Zacks #1 Rank stocks here.
Unisys Corporation is a Blue Bell, PA-based IT firm specializing in securing client operations, increasing efficiency of data centers, enhancing support to their end users and constituents and modernizing their enterprise applications.
The company is benefiting from a strong product line in its Technology segment and expansion in its distribution capabilities by building new reseller channels.
The Zacks Rank #1 stock has a VGM Score of A and delivered an average four-quarter positive earnings surprise of 70.3%. Moreover, the Zacks Consensus Estimate for fiscal 2018 improved 13.9% to $1.88 over the last 30 days.
Wix.com Ltd. (WIX - Free Report) is a cloud-based web development platform, offering solutions that enable businesses, organizations, professionals and individuals to develop customized websites and applications.
Addition of new products and enhancement of existing products is driving the company’s top-line. The company continues to launch a number of user-friendly applications to meet the requirements of a dynamic retail environment, consequently adding to its user base.
Wix has a Zacks Rank #2 and a VGM Score of B. The company delivered an average four-quarter positive earnings surprise of 20.19%. The Zacks Consensus Estimate for fiscal 2018 earnings of 79 cents increased 29.5% in the last 30 days.
CDW Corporation (CDW - Free Report) is a provider of integrated IT solutions to business, government, education and healthcare customers primarily in the United States and Canada.
The company has been witnessing growth across all U.S. channels and international operations. Notably, the company’s customer end-markets and expanding product and technology portfolio are key drivers.
The Zacks Rank #2 stock has a VGM Score of B and an average four-quarter positive earnings surprise of 5.56%. The Zacks Consensus Estimate for fiscal 2018 earnings of $4.97 increased 7 cents in the last 30 days.
On Assignment, Inc. (ASGN - Free Report) is a provider of IT and professional services primarily in the technology, creative/digital, engineering, life sciences and government sectors.
Apart from innovations, an inorganic growth strategy is driving the company. The buyout of ECS Federal, a prominent name among government services contractors, which deals with the delivery of cyber security, IT modernization, cloud and DevOps solutions to government enterprises, is expected to boost the top line of the company.
On Assignment has a Zacks Rank #2 and VGM Score of A. The company delivered an average four-quarter positive earnings surprise of 9.72%. The Zacks Consensus Estimate for fiscal 2018 earnings grew 13.9% to $1.65 in the last 30 days.
DXC Technology (DXC - Free Report) offers a broad array of professional services to clients in the global, commercial and government markets. It specializes in IT systems consulting – designing, developing, implementing, and integrating information systems.
The company is gaining from impressive growth in the cloud business. Its ongoing investments in differentiating solutions and platform integrations are expected to reap long-term benefits.
This Zacks Rank #2 stock has a VGM Score of B and an average four-quarter positive earnings surprise of 12.15%. The Zacks Consensus Estimate for fiscal 2019 earnings of $8.15 rose 8 cents in the last 30 days.
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 >>