The non-manufacturing sector recorded growth for the 104th consecutive month in September, per the latest data released by The Institute for Supply Management (ISM) on Oct 3.
Non-Manufacturing Index (NMI) for September came in at 61.6%, up 3.1 percentage points from the August reading and marked the 109th consecutive month of growth of the overall economy. The latest NMI reading indicates continued growth in the non-manufacturing sector at a faster rate and marks an all-time high since the inception of the composite index in 2008. An NMI reading above 50% indicates the non-manufacturing sector economy is expanding.
All the 17 non-manufacturing industries reported growth in September. The expansion was driven by increase in business activity, new orders, employment, supplier deliveries, inventories, prices and new export orders.
Key Contributing Metrics
The ISM Business Activity Index registered growth of 65.2% in September, growing for the 110th consecutive month. The index marked its highest reading since January 2004, with all the 17 industries reporting an increase in business activity.
The index for New Orders jumped to 61.6% in the month, marking the 92nd straight month of increase and that too at an accelerated rate compared with August. All the 17 industries reported an increase in new orders.
Employment Index surged to 62.4%, expanding for 55 months 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. Except, Utilities and Information, 13 industries reported employment growth.
The index for prices jumped to 64.2% in the month, marking the 31st straight month of increase. Price increase was witnessed by 13 industries, except Accommodation & Food Services.
New Export Orders Index surged to 61%, expanding for the 20th consecutive month. New export orders increased in 10 industries, except Health Care & Social Assistance.
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 business services sector, which is tightly linked to non-manufacturing activities and the broader economy, is currently in great shape. In fact, the Zacks Business Services Sector has gained 20.4% over the past year, significantly outperforming the S&P 500’s rally of 15.2%.
The buoyancy in the sector is further confirmed by its Zacks Sector Rank in the top 50% (8 out of 16 sectors). So, it will be a prudent decision to buy stocks with sound fundamentals from the space.
4 Business Services Stocks Worth Investing In
With the help of the Zacks Stock Screener, we have zeroed in on four promising stocks, which have a 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 have also witnessed upward earnings estimate revisions in the past 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 four picks.
Based in Michigan, Steelcase Inc. (SCS - Free Report) manufactures and sells integrated furniture settings, user-centered technologies, and interior architectural products. The company carries a Zacks Rank #1 and has a VGM Score of A. Its shares have climbed 19.5% year to date.
The company’s expected earnings growth rate for the current year is 24.2%. The Zacks Consensus Estimate for current year EPS has improved 18.9% in the past 60 days.
Based in New York, Broadridge Financial Solutions, Inc. (BR - Free Report) provides investor communications and technology-driven solutions for the financial services industry worldwide. The company carries a Zacks Rank #2 and has a VGM Score of B. Its shares have climbed 43.2% year to date.
The company’s expected earnings growth rate for the current year is 10.9%. The Zacks Consensus Estimate for current year EPS has improved 3.3% in the past 60 days.
Based in Illinois, Envestnet, Inc. (EVN - Free Report) provides intelligent systems for wealth management and financial wellness. The company carries a Zacks Rank #2 and has a VGM Score of B. Its shares have rallied 23.3% year to date.
The company’s expected earnings growth rate for the current year is 43.5%. The Zacks Consensus Estimate for the current year has improved 3.3% in the past 60 days.
Based in California, Core-Mark Holding Company, Inc. (CORE - Free Report) offers fresh and broad-line supply solutions to the convenience retail industry. The company carries a Zacks Rank #2 and has a VGM Score of A. Its shares have gained 6.5% year to date.
The company’s expected earnings growth rate for the current year is 25%. The Zacks Consensus Estimate for current year EPS has improved 5% in the last 60 days.
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