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5 Business Services Stocks Set to Beat This Earnings Season

Shuvra Shankar Dey

The business services industry benefited from economic strength and stability, higher government and personal spending in the first quarter. Both manufacturing and non-manufacturing activities grew, thus keeping demand for business services in good shape.

The Purchasing Managers' Index (PMI) measured by Institute of Supply Management (ISM) touched 55.3% in March, indicating better economic activity in the manufacturing sector. This marked the 31st consecutive month of manufacturing growth. The ISM-measured Non-Manufacturing Index (NMI) touched 56.1% in March, marking the 110th straight month of growth in non-manufacturing activities.

Tailwinds Likely to Support Earnings Growth

Strength in commercial construction, finance and insurance, health care, support services, real estate, rental and leasing primarily aided the space. Temporary relief from additional tariffs is expected to be a boon for the non-manufacturing space.

Per the latest Earnings Outlook report, total earnings for the Zacks Business Services sector are expected to be up 8.3% on 3.4% higher revenues. The sector is the only Zacks sector (out of the total 16) that is expected to register double-digit earnings growth in the current reporting cycle.

The sector has outperformed the Zacks S&P 500 composite year to date. It has gained 25.6% compared with the S&P 500’s rally of 16.8%.

We have zeroed in on some business services stocks that are poised to beat earnings estimates this quarter. An earnings surprise is likely to lead to an outperformance in shares.

Selecting Stocks Poised to Beat

With the existence of a number of industry players, finding the right business services stocks that have the potential to beat earnings can be daunting. Our proprietary methodology, however, makes it fairly simple.

We have narrowed down the list of choices by looking at stocks that have the combination of a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP is our proprietary methodology for determining stocks that have the best chance to beat in their next earnings announcement. It is the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate.

Our research shows that for stocks with this combination, the chance of a positive earnings surprise is as high as 70%.

Our Choices

Technology-enabled financial solutions provider Blucora, Inc. BCOR will report first-quarter 2019 results on May 8. The company has an Earnings ESP of +5.29% and sports a Zacks Rank #1.You can see the complete list of today’s Zacks #1 Rank stocks here.

The Earnings ESP for FleetCor Technologies, Inc. FLT is +0.38% and it carries a Zacks Rank of 2, currently. The commercial payments solution provider is scheduled to report first-quarter 2019 earnings on May 7.

Investor communications and technology-driven solutions provider Broadridge Financial Solutions, Inc. BR has an Earnings ESP of +0.34% and carries a Zacks Rank #3. The company will report third-quarter fiscal 2019 results on May 7.

The Earnings ESP for Envestnet, Inc. ENV is +0.56% and it carries a Zacks Rank of 3 currently. Thisprovider of intelligent systems for wealth management and financial wellness is scheduled to report first-quarter 2019 earnings on May 8.

Outsourced document solutions and IT consulting data security provider Cynergistek, Inc. CTEK has an Earnings ESP of +7.69% and carries a Zacks Rank #3. The company is expected to report first-quarter 2019 results on May 13.

Zacks' Top 10 Stocks for 2019

In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-holds for the year?

Who wouldn't? Our annual Top 10s have beaten the market with amazing regularity. In 2018, while the market dropped -5.2%, the portfolio scored well into double-digits overall with individual stocks rising as high as +61.5%. And from 2012-2017, while the market boomed +126.3, Zacks' Top 10s reached an even more sensational +181.9%.

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Blucora, Inc. (BCOR) : Free Stock Analysis Report
 
FleetCor Technologies, Inc. (FLT) : Free Stock Analysis Report
 
Broadridge Financial Solutions, Inc. (BR) : Free Stock Analysis Report
 
Envestnet, Inc (ENV) : Free Stock Analysis Report
 
Cynergistek, Inc. (CTEK) : Free Stock Analysis Report
 
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