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US GDP Increases 4.2% in the Second Quarter: 4 Solid Picks

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U.S. gross domestic product (GDP) grew at an annualized rate of 4.2% in the second quarter of 2018, per the latest data released by the Bureau of Economic Analysis (BEA) on Aug 29.

Second-quarter GDP came in 0.1 percentage point ahead of the “advance” estimate (released in July) and almost doubled from 2.2% increase witnessed in the first quarter. The growth represents the strongest economic performance in nearly four years and the highest rate after 4.9% GDP reported in the third quarter of 2014.

The GDP growth reflects increase in consumer spending, business investment, and exports and government spending, which was, however, partially offset by a slight fall ininventory investment and housing investment.

Consumer spending or personal consumption expenditures (PCE), which accounts for more than two-thirds of U.S. economic activity, grew 3.8% in the second quarter, marking its highest improvement since 3.9% recorded in the fourth quarter of 2017 and the maximum in nearly four years. For July, consumer spending came in at 0.4%, in line with the previous month.

Government spending rose 2.3% in the second quarter compared with 1.5% rise in the first quarter of 2018. It had dipped 0.1% in 2017 but increased 1.4% and 1.9% in 2016 and 2015, respectively. Despite the heightened tensions over trade policy, exports increased 9.1% in the second quarter, recording the highest level since the third quarter of 2014. Imports fell 0.4% in the second quarter after a massive 11.8% rise recorded in the fourth quarter of 2017.

Considering these promising developments, we expect the economy to do well in the future.Additionally, the Fed forecasts 2018 GDP to rise 2.8% with 2.4% and 2% growth forecast for 2019 and 2020, respectively.

Top 4 Business Services Stocks to Buy Now

The business services sector stands to gain from a growing U.S. economy and thus adding stocks from the sector looks like a smart move.The buoyancy in the sector is further confirmed by its Zacks Sector Rank in the top 44% (7 out of 16 sectors).

Additionally, we observe that so far this year the sector has performed well compared with the benchmark. It has gained 16.8%, significantly outperforming the 9.6% rise of the Zacks S&P 500 Composite in the said time frame.

 

With the help of the Zacks Stock Screener, we have zeroed in on four promising stocks from the sector, which have a favorable Zacks Rank #1 (Strong Buy) or 2 (Buy), a VGM Score of A or B and  a solid expected earnings growth rate for the current year. These stocks also witnessed upward earnings estimate revisions in the last 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.

Our research shows that stocks with a VGM Score of A or B when combined with a Zacks Rank #1 or 2 offer the best investment opportunities for investors. Thus, the selected companies appear to be compelling investment propositions at the moment.

Let’s have a look at the top four gainers:

Massachusetts-based environmental, energy, and industrial services’ provider, Clean Harbors, Inc. (CLH - Free Report) currently sports a Zacks Rank #1 and has a VGM Score of B. The company’s expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for the current year improved 37.5% in the last 60 days.

Illinois-based provider of executive search, culture shaping, and leadership consulting services, Heidrick & Struggles International, Inc. (HSII - Free Report) sports a Zacks Rank #1 and has a VGM Score of A. The company’s expected earnings growth rate for the current year is 84.4%. The Zacks Consensus Estimate for the current year improved 11% in the last 60 days.

New Jersey-based business process services company, Conduent Incorporated (CNDT - Free Report) has a Zacks Rank #1 and a VGM Score of A.The company’s expected earnings growth rate for the current year is 35.3%. The Zacks Consensus Estimate for the current year improved 12.7% in the last 60 days.

Puerto Rico-based transaction processing business serving company, EVERTEC, Inc. (EVTC - Free Report) has a Zacks Rank #2 stock and a VGM Score of B.The company’s expected earnings growth rate for the current year is 20.4%. The Zacks Consensus Estimate for the current year improved 7.3% in the last 60 days.

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