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5 Business Services Stocks Set to Beat This Earnings Season

Zacks Equity Research

Per the latest Earnings Outlook, for the total number of S&P 500 members from the Business Services sector that have reported till Jul 24, earnings increased 7.7% from the same period last year on 4.4% higher revenues, with 60% of the companies beating earnings estimates and 60% surpassing revenue estimates.

Per the report, total earnings of the sector are expected to be up 6.7% on 3.6% higher revenues.

The Zacks Business Services sector, which has rallied 30.9% year to date, is one of the attractive areas right now. It currently carries a Zacks Sector Rank in the top 32% (5 out of 16 sectors).

Primary Catalysts

The sector remains one of the major beneficiaries of the ongoing economic strength. While corporate spending has been marred by trade tensions, government and consumer spending supported GDP.

Backed by economic strength, both manufacturing and non-manufacturing activities were healthy, keeping demand for business services in good shape in the soon-to-be reported quarter. Strength in commercial construction, finance and insurance, health care, support services aided the space.

According to Institute of Supply Management indices, June marked the 34th month of consecutive manufacturing growth and 113th month of consecutive non-manufacturing growth. Purchasing Managers' Index, the measure of manufacturing activities came in at 51.7% and Non-Manufacturing Index touched 55.1%. In both cases, any figure above 50% indicates expansion.

Selecting Stocks Poised to Beat

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.

With the existence of a number of industry players, finding the right business services stocks 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

Car and truck rentals, car sharing, and ancillary services provider Avis Budget Group CAR has an Earnings ESP of +15.07% and sports a Zacks Rank #1. The company will report second-quarter 2019 results on Aug 5. You can see the complete list of today’s Zacks #1 Rank stocks here.

Management and technology consulting, engineering, analytics and cyber solutions provider BoozAllen Hamilton Holding BAH has an Earnings ESP of +13.02% and carries a Zacks Rank #2. The company will report first-quarter fiscal 2020 results on Jul 29.

The Earnings ESP for global payments giant Mastercard MA is +0.55% and it carries a Zacks Rank of 3. The company is scheduled to report second-quarter 2019 earnings on Jul 30.

Environmental, energy, and industrial services provider Clean Harbors CLH will report second-quarter 2019 results on Jul 31. The company has an Earnings ESP of +3.23% and a Zacks Rank #3.

The Earnings ESP for measurement giant Nielsen Holdings NLSN is +1.38% and the company carries a Zacks Rank of 3. It is scheduled to report second-quarter 2019 earnings on Jul 31.

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