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U .S. Service Sector Accelerates in February: 5 Big Winners

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On Mar 4, the Institute for Supply Management (ISM) reported that the U.S. non-manufacturing sector grew at the fastest pace since February 2019. ISM’s non-manufacturing index soared to 57.3% in February, above the consensus estimate of 54.9% and January’s figure of 55.5%.

The data indicated expansion of the services sector, which accounts for more than two-thirds of U.S. economic activity. In fact, respondents of the survey expressed their worries regarding the impact of the coronavirus outbreak on the supply chain. However, they remain positive about present business conditions and the overall economy due to the continued growth of the non-manufacturing sector.

Overall, out of 18 non-manufacturing industries surveyed by the ISM, 16 reported growth in February. The accommodation and food services industry grew the most, followed closely by management of companies and support services; mining; finance and insurance; real estate and leasing.

In fact, the service sector also reported strong growth in export orders in February, which rose 55.6% compared with the January reading of 50.1%. Additionally, there has been a 6.9% gain in the New Orders Index that soared to 63.1%, compared with January’s reading of 56.2%.

With the unemployment rate nearly at 50-year low, many respondents stated that “a shortage of workers at several levels is impacting the quality of employees we are looking to hire for capital projects we need to start.”

However, the employment index continued to grow, rising 2.5% last month to 55.6%, compared with January’s reading of 53.1%.

5 Stocks to Buy

Given the positive development in the U.S. service sector we have shortlisted five stocks that can provide high return on investment, despite headwinds related to the latest coronavirus outbreak. What’s more? These stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.                       

Our first choice is information and analytics company,comScore, Inc. SCOR. This company measures audiences, consumer behavior, and advertising across media platforms. The company’s expected earnings growth rate for the current quarter is 34.8% against the Zacks Business - Services industry’s projected earnings decline of 48.4%.

The Zacks Consensus Estimate for comScore’s current-year earnings has been revised 9.7% upward over the past 60 days.

The Zacks Consensus Estimate for Texas Roadhouse, Inc.’s TXRH, a casual dining restaurant chain, current-year earnings has been revised 6.6% upward over the past 60 days.The company’s expected earnings growth rate for the current quarter is 21.4% against the Zacks Retail - Restaurants industry’s projected earnings decline of 0.3%.

Next in our list is life insurance products and services provider American Equity Investment Life Holding Company AEL. The company’s expected earnings growth rate for the current quarter is 25.8% against the Zacks Insurance - Life Insurance industry’s projected earnings decline of 39.5%. The Zacks Consensus Estimate for the company’s current-year earnings has been revised 21.2% upward over the past 60 days.

CBIZ, Inc. (CBZ - Free Report) provides financial, insurance, and advisory services in the United States and Canada. The company’s expected earnings growth rate for the current quarter is 10.2% compared with the Zacks Consulting Services industry’s projected earnings growth of 6.6%. The Zacks Consensus Estimate for the company’s current-year earnings has been revised 6.1% upward over the past 60 days.

We end with,Kirkland Lake Gold Ltd. (KL - Free Report) , a company that engages in the acquisition, exploration, development, and operation of gold properties. The company’s expected earnings growth rate for the current year is 33.2% compared with the Zacks Mining - Gold industry’s projected earnings growth of 24.1%. The Zacks Consensus Estimate for the company’s current-year earnings has been revised 16.6% upward over the past 60 days.

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