Back to top

Image: Bigstock

US Service Activity Springs Back to Life: 4 Top Picks

Read MoreHide Full Article

Per the latest report from the Institute of Supply Management (ISM), service activity in the United States grew for the 103rd consecutive month in August, indicating flourishing non-manufacturing activity in the country.

Steadiness in the metric, which tracks the performance of service-focused companies in America, points toward a strengthening economy. Hospitals and healthcare service providers, retailers as well as restaurants depicted growth in August.

Further, the fact that non-manufacturing activity in the United States have grown for more than 100 months makes investing in business service stocks a prudent decision.

Booming U.S. Service Sector

The Institute of Supply Management reported on Sep 6 that non-manufacturing activity for August came in at 58.5%, surpassing the consensus estimate of 56.3% and last month’s figure of 55.7%. A reading above 50 indicates expansion in the sector. Having said that, a reading above 55% is touted as phenomenal.

Firms across America complained that trade war woes and threats pertaining to the imposition of newer tariffs have actually sent prices of raw materials higher. Further, paucity of skilled labor was pointed out as another hindrance to development. However, a flourishing domestic economy and robust demand more than made up for such adversities. For the record, the U.S. economy is expected to exhibit its fastest pace of growth in as many as 13 years in 2018.

Finally, of the 18 industries that were surveyed by the Institute of Supply Management, 17 reported growth in the month, with construction, transportation & warehousing, retail trade and educational services reporting most of the gains.

Business Activity, New Orders on the Rise

Further, non-manufacturing inventories index increased 53.5% in August. This marked the seventh consecutive month of increase.  Moreover, the ISM Business Activity Index registered growth of 60.7% in August to report growth in business activity for the 109th consecutive month. Notably, of the 15 industries surveyed, 14 reported an increase in business activity for the month.

Looking at the other positive developments from the report, the non-manufacturing New Orders Index surged to 60.4% in the month. This represents an advancement for 91 straight months that too at an accelerated rate when compared with July. Finally, the non-manufacturing Employment Index surged to 56.7%, expanding for the 54th month on the trot.

4 Hot Choices

A flourishing U.S. economy has assisted the growth of the service sector in America. Trade war and tariff related worries could not deter service activity in August as majority of the service providers reported growth in the month. Strong employment prospects and steadily rising demand gave a boost to non-manufacturing activity in the United States last month.

In this context, we have selected four stocks that are expected to gain from these factors. These five stocks flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

CRA International, Inc. (CRAI - Free Report) provides financial and business consulting services.

The company is based out of Boston, MA and sports a Zacks Rank #1. The expected earnings growth rate for the current year is 19.37%. The Zacks Consensus Estimate for the current year has improved 4.6% over the past 60 days.

NV5 Global, Inc. (NVEE - Free Report) is a provider of technical consulting and certification services.

The company is based out of Hollywood, FL and carries a Zacks Rank #2. The expected earnings growth rate for the current year is 40.79%. The Zacks Consensus Estimate for the current year has improved 0.4% over the past 60 days.

Broadridge Financial Solutions Inc. (BR - Free Report) provides technology-based outsourcing solutions to the financial services industry.

The company is based out of Lake Success, NY and carries a Zacks Rank #2. The expected earnings growth rate for the current year is 11.04%. The Zacks Consensus Estimate for the current year has improved 3.3% over the past 60 days.

DXC Technology Company (DXC - Free Report) is an IT services company.

The company is based out of Tysons, VA and has a Zacks Rank #2. The expected earnings growth rate for the current year is 2.66%. The Zacks Consensus Estimate for the current year has improved 1% over the past 60 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 >>