4 Stocks to Buy as Services Activity Continues to Rebound
Services activity in the United States increased for the sixth consecutive month in June, indicating a steady rebound. This comes as inflation finally showed signs of easing, prompting the Fed to halt its interest rate hikes.
Low borrowing costs are likely to further help the services sector, which is expected to benefit stocks like RCM Technologies, Inc. RCMT, IBEX Limited IBEX, Tyler Technologies, Inc. TYL and Bowman Consulting Group Ltd. BWMN.
The Institute for Supply Management reported on Jul 6 that the Purchasing Managers’ Index (PMI) rose to 53.9% in June from 50.3% in May. The services industry accounts for over two-thirds of the economy. A reading of more than 50 indicates growth in the services sector.
The June reading also came in above economists’ expectations of a rise of 51%. The services sector has now grown in 36 out of the past 37 months, with December 2022 being the only exception.
The Business Activity Index increased to 59.2% in June, up 7.7% from May’s reading of 51.5%. The New Orders Index rose to 55.5%, up 2.2% from May’s reading of 52.9%.
The services sector has shown immense resilience amid rising price pressures, while the manufacturing sector has felt the maximum heat. The Manufacturing Sector came up with a reading below 50 for the eighth straight month, which is the longest stretch since the Great Recession.
The Fed has increased interest rates by 500 basis points since March 2022, taking a toll on the manufacturing sector. However, it finally put a halt on hiking rates in June following fresh economic data that showed inflation easing.
Also, people have been spending more on services and less on goods ever since the economy reopened. This has been helping the sector. Another factor that has been boosting services activity is a resilient labor market.
Although job additions have slowed over the months, it is still on solid ground. Moreover, the services sector is likely to get a further boost from the pause in interest rate hike.
Our Choices
The present situation makes for an ideal opportunity to invest in the following four stocks.
RCM Technologies, Inc. is a national provider of business, technology and resource solutions in information technology and professional engineering to customers in corporate and government sectors. RCMT has grown its information technology competencies in the areas of resource augmentation, e-business, Enterprise Resource Planning support, network and infrastructure support and knowledge management.
RCM Technologies’ expected earnings growth rate for the current year is 3.5%. The Zacks Consensus Estimate for current-year earnings has improved 9.6% over the past 60 days. RCMT’s shares have gained 65.9% in the past three months. RCM Technologies presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
IBEX Limited is a provider of outsourced CX solutions. IBEX offers customer support, technical support, inbound/outbound sales, business intelligence and analytics, digital demand generation and CX surveys and feedback analytics service.
IBEX Limited’s expected earnings growth rate for the current year is 55.3%. The Zacks Consensus Estimate for current-year earnings has improved 19.9% over the past 60 days. IBEX presently has a Zacks Rank #1.
Tyler Technologies, Inc. is a leading provider of integrated information management solutions and services for the public sector. TYL’s clients consist primarily of federal, state, county and municipal agencies, school districts, and other local government offices.
Tyler Technologies’ expected earnings growth rate for the current year is 1.1%. Shares of TYL have gained 15.2% in the past three months. Tyler Technologies currently sports a Zacks Rank #1.
Bowman Consulting Group Ltd. provides planning, engineering, construction management, commissioning, environmental consulting, geomatics, survey, land procurement and other technical services to customers operating in a diverse set of regulated end markets. BWMN is headquartered in Reston, VA.
Bowman Consulting Group’s expected earnings growth rate for the current year is more than 100%. Shares of BWMN have gained 17.5% in the past three months. Bowman Consulting Group currently sports a Zacks Rank #1.
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Tyler Technologies, Inc. (TYL) : Free Stock Analysis Report
RCM Technologies, Inc. (RCMT) : Free Stock Analysis Report
IBEX Limited (IBEX) : Free Stock Analysis Report
Bowman Consulting Group Ltd. (BWMN) : Free Stock Analysis Report
