U.S. markets close in 37 minutes

Business Services Apr 29 Earnings Rooster: MA, ADP & More

Zacks Equity Research

The first-quarter 2020 reporting cycle for the Business Services Sector commenced last week on a fairly positive note amid the coronavirus rampage. Since the virus outbreak started affecting businesses from the second half of March, its impact will be more evident in the second-quarter results.

Meanwhile, for this cycle, the latest Earnings Preview suggests a modest improvement in earnings from the sector. Total earnings are expected to be up 1.9% on 6.9% higher revenues.

Last week, we saw impressive quarterly results from Equifax EFX and Interpublic IPG, both reporting stellar top- and bottom-line numbers. Robert Half RHI delivered lower-than-expected earnings but higher-than-anticipated revenues.

Equifax has been benefiting from its move to cloud-native tools that are driving collaboration as part of the company’s cloud technology and data transformation.

Interpublic continues to benefit from organic growth on strategic differentiation, strong go-to-market offerings and account wins.

Robert Half’s wholly-owned subsidiary, Protiviti, through which the company offers risk consulting, internal audit and information technology consulting services, remains strongly positioned in the market and a double-digit revenue performer.

Sneak Peek Into Upcoming Earnings Releases

Given this encouraging scenario, let’s take a look at how the five business services companies — Mastercard MA, Automatic Data Processing ADP, Spotify SPOT, Rollins ROL and Pluralsight PS — are placed ahead of their earnings this season.

Per our quantitative model, a company needs the right combination of the following two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better — to increase the odds of a positive earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Payments giant Mastercard is unlikely to beat on earnings in the first quarter as it has an Earnings ESP of -0.83% and currently carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Earlier too, our model did not predict a beat for the company when we issued our first-quarter earnings preview article. Back then, the stock had an Earnings ESP of -1.59% and carried the same Zacks Rank.

Notably, the Zacks Consensus Estimate of $1.74 per share for Mastercard’s earnings indicates a 2.3% drop from the prior-year reported number. The consensus estimate for sales of $3.96 billion suggests a modest 1.9% year-over-year increase.

The company’s quarterly results are likely to reflect business losses from the coronavirus-induced economic slowdown. While its cross-border business is expected to have taken a hit from the reduced travel across borders, domestic revenues might have suffered due to lower consumer spending.

Mastercard Incorporated Price and EPS Surprise

Mastercard Incorporated Price and EPS Surprise

Mastercard Incorporated price-eps-surprise | Mastercard Incorporated Quote

Cloud-based human capital management solutions provider ADP is unlikely to beat on earnings in third-quarter fiscal 2020 as it has an Earnings ESP of -0.67% and currently carries a Zacks Rank of 4 (Sell).

Earlier too, our model did not predict a beat for the company when we issued our fiscal third-quarter earnings preview article. Back then, the stock had the same Earnings ESP and carried a Zacks Rank #3.

However, the company’s earnings are anticipated to have benefited from revenue growth, margin performance and lower adjusted effective tax rate, the Zacks Consensus Estimate for which is pegged at $1.93, indicating a year-over-year increase of 9%.

Contributions from New Business Bookings, solid retention, interest earned on funds held for clients, growth in the number of employees on clients’ payrolls and an increase in the average number of worksite employees are likely to have driven revenues, the consensus estimate for which stands at $4.05 billion, calling for 5.2% year-over-year growth.

Automatic Data Processing, Inc. Price and EPS Surprise

Automatic Data Processing, Inc. Price and EPS Surprise

Automatic Data Processing, Inc. price-eps-surprise | Automatic Data Processing, Inc. Quote

Pest and termite control services Rollins is also unlikely to beat on earnings in the to-be-reported quarter as it has an Earnings ESP of -7.14% and carries a Zacks Rank of 3, at present.

Previously too, the model did not predict a beat when we issued our first-quarter earnings preview article. The stock then had the same Earnings ESP and Zacks Rank.

Rollins’ bottom line is likely to have benefited from improved efficiency in routing and scheduling technology, offset by rising expenses during the January-March period. With the consensus mark pegged at 14 cents, earnings are expected to remain flat year over year.

Acquisitions, organic growth and pricing are likely to have aided the company’s revenues, the Zacks Consensus Estimate for which is pinned at $475.9 million, suggesting 10.9% year-over-year growth.

Rollins, Inc. Price and EPS Surprise

Rollins, Inc. Price and EPS Surprise

Rollins, Inc. price-eps-surprise | Rollins, Inc. Quote

Music streaming giant Spotify is likely to beat on earnings as this Zacks #2 Ranked stock has an Earnings ESP of +26.53%.

The Zacks Consensus Estimate for the bottom line is pegged at a loss of 49 cents, suggesting a 45.6% narrower loss, year over year. The consensus mark for revenues stands at $2.02 billion, indicating year-over-year growth of 17.9%.

Spotify Technology SA Price and EPS Surprise

Spotify Technology SA Price and EPS Surprise

Spotify Technology SA price-eps-surprise | Spotify Technology SA Quote

Technology skill development solutions provider, Pluralsight, with an Earnings ESP of 0.00% and a Zacks Rank of 3 is also not expected to beat on earnings this time around.

The Zacks Consensus Estimate for the company’s first-quarter bottom line is pegged at a loss of 14 cents, suggesting a 100% year-over-year wider loss. The consensus mark for revenues is pinned at $88.3 million, indicating growth of 26.9% from the prior-year reported figure.

Pluralsight, Inc. Price and EPS Surprise

Pluralsight, Inc. Price and EPS Surprise

Pluralsight, Inc. price-eps-surprise | Pluralsight, Inc. Quote

The Hottest Tech Mega-Trend of All

Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.

See Zacks' 3 Best Stocks to Play This Trend >>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Equifax, Inc. (EFX) : Free Stock Analysis Report
 
Automatic Data Processing, Inc. (ADP) : Free Stock Analysis Report
 
Interpublic Group of Companies, Inc. (The) (IPG) : Free Stock Analysis Report
 
Mastercard Incorporated (MA) : Free Stock Analysis Report
 
Robert Half International Inc. (RHI) : Free Stock Analysis Report
 
Rollins, Inc. (ROL) : Free Stock Analysis Report
 
Spotify Technology SA (SPOT) : Free Stock Analysis Report
 
Pluralsight, Inc. (PS) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research