The Business-Services industry has outpaced the S&P 500 Index so far this year. The industry, which is placed in the top 26% of more than the 250 Zacks industries, has rallied 44.1% in the said time frame, surpassing the index’s rise of 18.7%. The outperformance can be attributed to economic strength, which has kept manufacturing and non-manufacturing activities in good shape and the demand environment strong.
Strength Across the Economy Boosts Industry
The industry’s performance is a function of the health of the broader economy, which is currently strong. U.S. GDP grew at an annualized rate of 3.1% in first-quarter 2019 (per the data released by the Bureau of Economic Analysis on Jun 27) compared with 2.2% increase in fourth-quarter 2018.
Backed by economic strength, both manufacturing and non-manufacturing activities remain healthy, keeping demand for business services in good shape. The Purchasing Managers' Index measured by Institute of Supply Management (ISM) touched 51.7% in June, indicating better economic activity in the manufacturing sector. This marks the 34th consecutive month of manufacturing growth. Also, June was the 113th straight month of growth in non-manufacturing activities, with ISM-measured Non-Manufacturing Index touching 55.1%.
Less Vulnerable to Trade War Woes
Since business services firms have lower foreign exposure compared to goods companies, the industry is less affected by trade war. Also, service firms incur lower foreign input costs that might be subject to tariffs. So, service stocks are safe amid escalating US-China trade tensions.
3 Business Services Stocks to Invest In
The business services industry comprises companies that offer a range of services, including specialty rental, supply chain management, electronic commerce, technology, document management, digital audience, data, voice, analytical, and business transformation services, among others.
With the help of the Zacks Stock Screener, we have zeroed in on three promising stocks from the business services industry, which have a Zacks Rank #1 (Strong Buy) and a VGM Score of A or B. These stocks have also performed impressively on the bourses on a year-to-date basis. These stocks also have a solid expected earnings growth rate for 2019 and have 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 (Buy) offer the best investment opportunities. Thus, the selected companies appear to be compelling investment propositions at the moment.
Let’s take a look at the stocks.
Core-Mark Holding Company, Inc. CORE markets fresh and broad-line supply solutions to the convenience retail industry. Currently, it sports a Zacks Rank #1 and has a VGM Score of A. It has a market capitalization of $1.78 billion. The stock has rallied 64.7% year to date.
Core-Mark Holding Company, Inc. Price, Consensus and EPS Surprise
Core-Mark Holding Company, Inc. price-consensus-eps-surprise-chart | Core-Mark Holding Company, Inc. Quote
The company’s expected earnings growth rate for 2019 is 13.7%. The Zacks Consensus Estimate for 2019 has increased 3.3% in the past 90 days.
Avis Budget Group, Inc. CAR is a provider of car and truck rentals, car sharing, and ancillary services to businesses and consumers worldwide. Currently, it carries a Zacks Rank #1 and has a VGM Score of A. It has a market capitalization of $2.76 billion. The stock has rallied 62.4% year to date.
Avis Budget Group, Inc. Price, Consensus and EPS Surprise
Avis Budget Group, Inc. price-consensus-eps-surprise-chart | Avis Budget Group, Inc. Quote
The company’s expected earnings growth rate for 2019 is 10.9%. The Zacks Consensus Estimate for 2019 has increased 4.1% in the past 90 days.
Viad Corp VVI operates as an experiential services company in the United States, Canada, the United Kingdom, continental Europe, and the United Arab Emirates. Currently, it carries a Zacks Rank #1 and has a VGM Score of B. It has a market capitalization of $1.41 billion. The stock has rallied 39.7% year to date.
Viad Corp Price, Consensus and EPS Surprise
Viad Corp price-consensus-eps-surprise-chart | Viad Corp Quote
The company’s expected earnings growth rate for 2019 is 9.4%. The Zacks Consensus Estimate for 2019 has increased 7.1% in the past 90 days.
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