The picture so far this earnings season has been encouraging for key players in the Business Services space like Omnicom Group Inc. OMC, The Interpublic Group of Companies, Inc. IPG and IHS Markit Ltd. INFO. Each of these companies delivered an earnings beat.
The business services sector has been on a strong footing driven by economic strength and stability that kept both manufacturing and non-manufacturing activities in good shape. The sector remains buoyed by a strong labor market and low unemployment and inflation.
Notably, U.S. GDP grew at an annualized rate of 3.1% in first-quarter 2019 per the "third" estimate released by the Bureau of Economic Analysis on Jun 27. This compares with 2.2% increase in fourth-quarter 2018.
June marked the 34th month of consecutive manufacturing growth with the Purchasing Managers' Index, measured by Institute of Supply Management (ISM), touching 51.7%. Also, June was the 113th month of consecutive growth in non-manufacturing activities with ISM-measured Non-Manufacturing Index touching 55.1%.
Since business services firms have lower foreign exposure compared to goods companies, the industry is less affected by trade war. Also, service firms incur lower foreign input costs that might be subject to tariffs.
The Zacks Business Services sector currently carries a Zacks Sector Rank in the top 32% (5 out of 16 sectors). It has gained a massive 30.4% year to date, outperforming the 17.4% rally of the Zacks S&P 500 composite.
Key Releases on Jul 25
Given this backdrop, investors interested in business services stocks can watch out for three companies that are scheduled to report second-quarter 2019 results on Jul 25.
According to the Zacks model, a company needs the right combination of two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better — to increase the odds of an earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
We do not recommend Zacks Rank #4 (Sell) or 5 (Strong Sell) stocks going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Waste management environmental services provider Waste Management WM will release its financial numbers before the bell.
The Zacks Consensus Estimate for revenues is pegged at $3.94 billion, indicating growth of 5.4% from the year-ago reported figure. The upside is likely to be driven by solid yield and volume growth in the collection and disposal business.
For earnings, the consensus mark is pegged at $1.07, indicating growth of 5.9% from the year-ago reported figure. Improved operating results in the solid waste business are likely to boost Waste Management’s bottom line.
The company has an impressive earnings surprise history, having surpassed estimates in three of the trailing four quarters, with the average beat being 3.4%.
The company’s Zacks Rank #3 and an Earnings ESP of +0.70% increases the odds of an earnings beat this quarter. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Financial services technology provider Fiserv FISV will release its quarterly numbers after the bell.
The Zacks Consensus Estimate for revenues is pegged at $1.51 billion, indicating year-over-year growth of 6.3%. Strength across core account and item processing businesses, electronic payments, card services and biller solutions are expected to drive the year-over-year improvement.
The consensus estimate for earnings stands at 80 cents per share, implying growth of 6.7% from the year-ago quarter. The bottom line is likely to benefit from revenue growth and better operating performance.
Fiserv delivered average four-quarter positive earnings surprise of 0.3%. It has a Zacks Rank #3 and an Earnings ESP of +0.79%.
Provider of non-hazardous solid waste collection, transfer, recycling, disposal, and energy services Republic Services RSG will release its financial numbers after the bell.
The Zacks Consensus Estimate for revenues is pegged at $2.62 billion, indicating growth of 4.2% from the year-ago reported figure. The upside is likely to be driven by strong pricing across the company’s collection, disposal and recycling processing businesses.
For earnings, the consensus mark is pegged at 78 cents, indicating growth of 6.9% from the year-ago reported figure.
Republic Services has an impressive earnings surprise history, having surpassed estimates in three of the trailing four quarters, with the average beat being 1.3%.
The company has a Zacks Rank #4 and an Earnings ESP of 0.00%.
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IHS Markit Ltd. (INFO) : Free Stock Analysis Report
Interpublic Group of Companies, Inc. (The) (IPG) : Free Stock Analysis Report
Omnicom Group Inc. (OMC) : Free Stock Analysis Report
Fiserv, Inc. (FISV) : Free Stock Analysis Report
Waste Management, Inc. (WM) : Free Stock Analysis Report
Republic Services, Inc. (RSG) : Free Stock Analysis Report
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