The Zacks Business Services sector is one of the 11 (out of the total 16) Zacks sectors expected to register earnings growth in second-quarter 2019, per the latest Earnings Preview report. The sector is expected to register total earnings growth of 9.4% on 3.6% higher revenues in the current reporting cycle.
In the second quarter, the sector performed well compared with the benchmark index. The sector gained 20.5%, which compared favorably with the Zacks S&P 500 composite’s rise of 10.4% in the said time frame.
What’s Driving Business Services Sector Earnings?
Given its widely diversified nature, earnings of business services sector players stand to benefit from the prevalent economic strength. While corporate spending was impaired by trade tensions, government and consumer spending supported GDP. U.S. GDP grew at an annualized rate of 2.1% in second-quarter 2019 (per the “advance” estimate released by the Bureau of Economic Analysis on Jul 26).
Backed by economic strength, both manufacturing and non-manufacturing activities remained healthy in the second quarter of 2019, which kept the demand for business services in good shape throughout the quarter.
The labor market also remained strong with record low unemployment levels and solid job additions during the second quarter. There were notable job additions in professional and business services.
All these factors acted as key growth catalysts for the sector in the second quarter.
4 Players Likely to Emerge Winners in Q2
Given this encouraging backdrop, let’s take a look at a handful of business services players that are poised to beat earnings estimates in the second quarter. An earnings surprise is likely to lead to an outperformance in shares.
With the help of the Zacks Stock Screener, we have zeroed in on four promising stocks from the business services sector, which have a favorable Zacks Rank #1 (Strong Buy) or 2 (Buy) or 3 (Hold) and a positive Earnings ESP. You can see the complete list of today’s Zacks #1 Rank stocks here.
Earnings ESP is our proprietary methodology for determining the stocks that have the best chances to deliver a positive earnings surprise. Earnings ESP shows the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Our research shows that for stocks with this combination, the chance of a positive earnings surprise is as high as 70%.
Virginia-based, Parsons (PSN - Free Report) provides technology-based solutions in the defense, intelligence and critical infrastructure markets in North America, the Middle East, and internationally. The company has an Earnings ESP of +5.26% and carries a Zacks Rank #2. The company is slated to report results on Aug 13.
Georgia-based, Repay Holdings (RPAY - Free Report) provides integrated payment processing solutions in the United States. The company has an Earnings ESP of +26.67% and carries a Zacks Rank #3. The company is scheduled to release results on Aug 14.
California-based, Green Dot (GDOT - Free Report) operates as a financial technology and bank holding company in the United States. The company has an Earnings ESP of +6.04% and a Zacks Rank #3. The company is slated to report results on Aug 7.
California-based, Veritone (VERI - Free Report) provides artificial intelligence and computing solutions in the United States and the United Kingdom. The company has an Earnings ESP of +1.08% and carries a Zacks Rank #3. The company is scheduled to release results on Aug 7.
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