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5 Stocks to Gain From Sharp Pick-Up in Service Sector Activity

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The coronavirus outbreak almost decimated the U.S. service sector last year. The pandemic compelled the government to impose lockdown measures, which eventually forced people to spend less on services.

However, pandemic-led restrictions have been relaxed this year and an increase in business activity helped the beleaguered service side of the U.S. economy to roar back. What’s more, the pace of vaccination has picked up, which now is expected to control the coronavirus outbreak and bolster America’s service sector in the near future that accounts for essentially 70% of U.S. GDP, as mentioned in a businessinsider article.

The service side of the economy like entertainment, retail, construction and real estate will now make the most of the pent-up consumer demand. Biden administration’s massive stimulus push to lift the struggling economy has given a jump-start to U.S. service providers so far this year.

Nonetheless, the non-manufacturing activity index of the Institute of Supply Management (ISM) recorded a reading of 63.7% in March versus 55.3% in February and surpassed analysts’ expectations. To top it, the reading went past the record set in October 2018, indicating the highest reading in the survey’s history, as cited in the businessinsider article.

Needless to say, the service side of the U.S. economy continues to remain in an expansionary mode since any reading above 50% indicates growth. In fact, any reading above 55% signifies broader strength, as mentioned in a MarketWatch article.

Moreover, Anthony Nieves, Chair of the ISM Services Business Survey Committee, said that “the past relationship between the Services PMI and the overall economy indicates that the Services PMI for March (63.7 percent) corresponds to a 5.1-percent increase in real GDP on an annualized basis.”

The ISM added that the measure of new orders for the service sector climbed to an all-time high of 67.2% last month from February’s reading of 51.9%. The measure of new orders for materials grew for the tenth successive month and also helped business activities pick up.

ISM’s business activity index too jumped to an all-time high of 69.4% last month from 55.5% in the prior month. Additionally, the measure of employment that constitutes a significant part of the survey grew for the third successive month in March after contracting in December. ISM’s services employment index climbed to 57.2% last month from 52.7% in February.

Things Brighten Up for US Service Sector: 5 Big Gainers

With U.S. service providers witnessing the fastest growth on record last month on an uptick in demand for new orders, investing in stocks from the said sector seems prudent at present. We have, thus, selected five such stocks that should make meaningful additions to your portfolio. These stocks at present flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Camping World Holdings Inc. CWH is a provider of services, protection plans, products and resources for recreational vehicle enthusiasts. The company currently has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings has jumped 53.7% over the past 60 days. The company’s expected earnings growth rate for the current year is 20.5%.

Darden Restaurants, Inc. DRI is one of the largest casual dining restaurant operators worldwide. The company has operations in the United States and Canada with more than 1,700 restaurants. The company currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has climbed 20.7% over the past 60 days. The company’s expected earnings growth rate for the current year is 24.9%.

ABM Industries Incorporated ABM is a provider of integrated facility solutions in the United States and internationally. The company currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has moved 28.1% up over the past 60 days. The company’s expected earnings growth rate for the current year is 33.3%.

Cross Country Healthcare, Inc. CCRN is a national leader in providing innovative healthcare workforce solutions and staffing services. The company currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has moved 116.1% up over the past 60 days. The company’s expected earnings growth rate for the current year is 45.7%.

TeleTech Holdings, Inc. TTEC is a customer experience technology and services company. The company currently has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings has climbed 36.4% over the past 60 days. The company’s expected earnings growth rate for the current year is 8.9%.

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ABM Industries Incorporated (ABM) : Free Stock Analysis Report
 
TeleTech Holdings, Inc. (TTEC) : Free Stock Analysis Report
 
Camping World Holdings Inc. (CWH) : Free Stock Analysis Report
 
Cross Country Healthcare, Inc. (CCRN) : Free Stock Analysis Report
 
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