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ASGN to Report Q2 Earnings: What's in Store for the Stock?

Zacks Equity Research

ASGN Incorporated ASGN is set to report second-quarter 2019 results on Jul 24.

The company’s earnings surpassed the Zacks Consensus Estimate in two of the trailing four quarters and missed it on other two occasions, the average positive surprise being 5.25%.

In the last reported quarter, the company’s earnings per share of 93 cents lagged the Zacks Consensus Estimate of 96 cents but improved 12% year over year.

ASGN’s revenues surged 34.8% year over year to $924 million and also surpassed the Zacks Consensus Estimate of $921 million.

Outlook and Estimates for Q2

For the second quarter, ASGN expects revenues between $967 million and $977 million, indicating 10.1-11.2% growth from the year-ago reported figure.

The Zacks Consensus Estimate for the same stands at $972 million, suggesting a 10.7% increase from the year-earlier reported figure.The consensus estimate for earnings of $1.19 has been flat ahead of the company’s earnings release.

ASGN Incorporated Price and EPS Surprise

ASGN Incorporated Price and EPS Surprise

ASGN Incorporated price-eps-surprise | ASGN Incorporated Quote

Let’s see how things are shaping up for the upcoming announcement.

Factors at Play

ASGN’s second-quarter results are likely to be driven by growth across all its segments. Solid uptick in the company’s staffing services coupled with fast-paced growth in its value added service offerings or consultative work is likely to be a steady tailwind.

Apex segment, which has been consistently performing well over the last few quarters, is expected to be a key driver in the upcoming quarterly results as well. The segment is benefiting from robust growth in Apex Systems and Life Sciences business. Further, growth in the company’s top accounts is likely to aid Creative Circle business.

Moreover, higher assignment revenues, driven by European operations and some of the company’s domestic practices, are projected to boost the company’s Oxford segment this earnings season.

Additionally, the company’s acquisition of DHA Group in January is bumping up its ECS revenues. In the last reported quarter, DHA contributed $10 million, which is likely to increase in the period to be reported.

However, the company anticipates the mix of permanent placement revenues to improve sequentially in the June quarter but decline on a year-over-year basis.

Softness in permanent-placement revenues coupled with the addition of lower-margin DHA business might be a relentless overhang on the company’s gross margin.

What Our Model Says

The proven Zacks model shows that a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has maximum chances of beating estimates if it also has a positive Earnings ESP. Zacks Rank #4 (Sell) or 5 (Strong Sell) stocks are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

ASGN currently carries a Zacks Rank #3, which increases the predictive power of ESP. However, its Earnings ESP of 0.00% in the combination makes surprise prediction difficult.

Stocks to Consider

Here are some stocks worth considering as our model shows that these have the right combination of elements to beat on earnings in their upcoming releases:

United States Cellular Corporation USM has an Earnings ESP of +15.66% and a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

CGI Group, Inc. GIB has an Earnings ESP of +1.27% and a Zacks Rank #2.

Thermo Fisher Scientific Inc. TMO has an Earnings ESP of +0.54% and a Zacks Rank of 2.

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