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Business Services Q1 Earnings on May 1: FISV, VRSK, SERV

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We are in the thick of the first-quarter earnings season, with earnings and revenue growth set to reach its highest level in seven years.

According to the latest Earnings Preview, 267 S&P 500 companies have already reported results. Per the report, first-quarter 2018 total earnings for these companies increased 25.1% from the same period last year on 10% higher revenues, with 76.8% beating EPS estimates and 73.8% beating revenue estimates. The proportion of companies beating both EPS and revenue estimates is 61.4%.

More than 900 companies (including 142 S&P 500 members) will report results this week.

Bullish View

Per the above report, stocks in the Business Services sector are expected to record top-and bottom line growth of 5.2% and 17.1%, respectively. Notably, the sector is one of the 13 Zacks sectors (out of total 16 Zacks sectors) expected to register double-digit earnings growth.

The report predicts that total first-quarter 2018 earnings are expected to be up 22.6% on 8.4% higher revenues. We note that the fourth quarter saw 13.4% earnings growth on 8.6% increase in revenues.

For full-year 2018, total earnings for the S&P 500 index are expected to be up 18.5% on 5.5% higher revenues.

Stocks to Watch Out For Earnings on May 1

Given this bullish backdrop, investors interested in the business services stocks are awaiting first-quarter 2018 results of the following companies on May 1.

Based in Wisconsin, Fiserv, Inc. FISV is a provider of financial services technology solutions. Currently, it carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for revenues for the to-be-reported quarter stands at $1,446 million, indicating year-over-year growth of 3.8%. The consensus estimate for earnings per share is pegged at 73 cents, indicating year-over-year growth of 15.9%.

The top line is expected to benefit from higher internal revenue growth and strong segmental performance on the back of enhanced digital payment services with updated technologies. The bottom line is likely to be positively impacted by tax benefits, profitable investments and operating margin improvement.

Fiserv has a decent earnings surprise history. The company’s earnings surpassed the Zacks Consensus Estimate in two of the previous four quarters, delivering an average beat of 0.8%. Currently, the company has an Earnings ESP of -0.28%. However, when we issued our earnings preview article earlier, its Earnings ESP was -0.06%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter. 

Fiserv, Inc. Price and EPS Surprise

 

Fiserv, Inc. Price and EPS Surprise | Fiserv, Inc. Quote

Based in New Jersey, Verisk Analytics, Inc. VRSK is a data analytics and risk assessment company. The company carries a Zacks Rank #2 (Buy).

The Zacks Consensus Estimate for revenues and earnings is pegged at $565.47 million and 92 cents per share, indicating year-over-year growth of 12.5% and 24.3%, respectively. We expect the company's results to be driven by strong organic growth, acquisitions and benefits from U.S. tax reforms. (Read more: Revenues, Tax Cuts to Aid Verisk Analytics Q1 Earnings)

Verisk has an impressive earnings surprise history. The company’s earnings surpassed the Zacks Consensus Estimate in three of the previous four quarters, delivering an average beat of 3.2%. The company has an Earnings ESP of 0.00%.

Verisk Analytics, Inc. Price and EPS Surprise

 

Verisk Analytics, Inc. Price and EPS Surprise | Verisk Analytics, Inc. Quote

Based in Tennessee, ServiceMaster Global Holdings, Inc. SERV provides outsourcing services for residential and commercial customers. The company has a Zacks Rank #3.

The Zacks Consensus Estimate for revenues and earnings is pegged at $661.9 million and 39 cents per share, indicating year-over-year growth of 2.9% and 14.7%, respectively. The top line is expected to benefit from higher organic growth and acquisitions. Lower tax rates as a result of the new tax law (Tax Cuts and Jobs Act) are likely to positively impact the company’s bottom line.

ServiceMaster has a decent earnings surprise history. The company’s earnings surpassed the Zacks Consensus Estimate in two of the previous four quarters, delivering an average beat of 3.0%. The company has an Earnings ESP of -1.02%.

ServiceMaster Global Holdings, Inc. Price and EPS Surprise

 

ServiceMaster Global Holdings, Inc. Price and EPS Surprise | ServiceMaster Global Holdings, Inc. Quote

What Does the Zacks Model Predict?

According to the Zacks model, a company with a Zacks Rank #1, 2 or 3 has a good chance of beating estimates if it also has a positive Earnings ESP. We don’t recommend Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially if they have a negative Earnings ESP.

Despite having a bullish Zacks Rank #2, we are not confident of an earnings beat for Verisk in the to-be-reported quarter. This is because the company’s 0.00% Earnings ESP makes surprise prediction difficult. 

Further, our proven model does not conclusively show that Fiserv and ServiceMaster are likely to beat on earnings in the to-be-reported quarter, despite carrying a Zacks Rank #3. This is because both the companies have negative Earnings ESP.

Overall, it is difficult to predict an earnings beat for the abovementioned business services stocks.

Irrespective of an earnings beat or miss, investors are likely to focus on the companies’ fundamentals to make investment decisions. Therefore, don’t forget to check our full write up on earnings releases of these stocks later.

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Verisk Analytics, Inc. (VRSK) : Free Stock Analysis Report
 
ServiceMaster Global Holdings, Inc. (SERV) : Free Stock Analysis Report
 
Fiserv, Inc. (FISV) : Free Stock Analysis Report
 
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