4 Service Stocks Poised to Beat Estimates This Earnings Season
The widely-diversified Business Services sector houses consulting, outsourcing, staffing, waste management, financial transactions, information services and technology services companies, to name a few.
The Sector’s Dynamics in Q4
Things were not rosy for the service sector throughout the fourth quarter of 2022 due to macroeconomic headwinds such as the ongoing Russia-Ukraine war, high inflation and Federal Reserve’s aggressive stance on hiking the interest rate to curb inflation. Also, widespread supply-chain disruptions and labor market constraints remained as major overhangs for service stocks. The fear of an economic slowdown impacted consumer spending negatively.
The sector is a major beneficiary of manufacturing and service activities and both entered a contraction phase in the fourth quarter. In December, the manufacturing sector contracted for the second consecutive month after 29 months of expansion. The service sector contracted for the first time after a 30-month period of expansion.
Nevertheless, the sector has plenty of driving factors, which cannot be ignored. The essentiality of certain services like waste management and pest control, rise in demand for risk mitigation and consulting services, increased expertise in improving operational efficiency and reducing costs, successful work-from-home models, growing adoption of cloud-based services and digital transformation acted as tailwinds in the quarter.
Earnings Expectations for Q4
Perthe latest Earnings Trends report, the business services sector is likely to record a 1.6% decline in earnings for the fourth quarter of 2022 despite a 3.5% sales increase. The projected movement implies a deceleration from 6.8% rise in earnings on a 9.5% increase in revenues in the third quarter. Avis Budget Group, Inc. CAR, Verisk Analytics, Inc. VRSK, Gartner, Inc. IT and Aptiv PLC APTV are some of the prominent players, which are poised to deliver an earnings beat this season.
Here’s How We Pick the Right Stocks
Against the current backdrop and amid a large number of business services stocks, it is always a daunting task for investors to pick a winning basket of stocks with the potential to deliver better-than-expected earnings.
While there is no foolproof method of choosing outperformers, our proprietary methodology — the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — helps identify stocks with high chances of delivering a positive surprise in their upcoming earnings announcement. Our research shows that for stocks with this perfect mix of elements, the odds of an earnings beat are as high as 70%.
The 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.
Car rental company Avis Budget Group has an Earnings ESP of +7.40% and currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Avis Budget is scheduled to report fourth-quarter 2022 results on Feb 13. The Zacks Consensus Estimate for its earnings has moved up 1.2% to $6.5 per share over the past 30 days.
Avis Budget Group, Inc. Price and EPS Surprise
Avis Budget Group, Inc. price-eps-surprise | Avis Budget Group, Inc. Quote
Data analytics solutions provider Verisk Analytics has an Earnings ESP of +0.75% and currently carries a Zacks Rank #2. The Zacks Consensus Estimate for its earnings has remained unchanged at $1.17 per share over the past 30 days.
Verisk Analytics, Inc. Price and EPS Surprise
Verisk Analytics, Inc. price-eps-surprise | Verisk Analytics, Inc. Quote
Technological research and consulting firm Gartner has an Earnings ESP of +0.52% and currently carries a Zacks Rank #3. The company is scheduled to report fourth-quarter 2022 results on Feb 7. The Zacks Consensus Estimate for its earnings has moved up 0.4% to $2.57 per share over the past 30 days.
Gartner, Inc. Price and EPS Surprise
Gartner, Inc. price-eps-surprise | Gartner, Inc. Quote
Automotive technology supplier Aptiv has an Earnings ESP of +0.21% and currently carries a Zacks Rank #3. The company is scheduled to report fourth-quarter 2022 results on Feb 2.
Aptiv PLC Price and EPS Surprise
Aptiv PLC price-eps-surprise | Aptiv PLC Quote
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
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Avis Budget Group, Inc. (CAR) : Free Stock Analysis Report
Gartner, Inc. (IT) : Free Stock Analysis Report
Verisk Analytics, Inc. (VRSK) : Free Stock Analysis Report
Aptiv PLC (APTV) : Free Stock Analysis Report
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