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Business Services Stocks' Earnings on Oct 23: TRU, RHI, TSS

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The third-quarter earnings season has begun, with 84 S&P 500 companies (collectively accounting for 22.3% of the index’s total market capitalization) having already reported their quarterly numbers as of Oct 19. Per the latest Earnings Preview, total earnings of these 84 companies increased 19.2% from the same period last year on 8.4% higher revenues, with 82.1% beating EPS estimates and 61.9% beating revenue estimates.

The proportion of these companies beating both EPS and revenue estimates is 54.8%.

Per the above report, the top and the bottom lines (in the S&P 500 Index) are likely to improve 7.2% and 19.2%, respectively at the end of the reporting cycle. In fact, of the 16 Zacks sectors, 10 are anticipated to end the third-quarter reporting cycle with double-digit earnings growth. One of them is the Zacks Business Services sector. On a year-over-year basis, earnings and revenues from this sector are anticipated to increase 10.8% and 3.8%, respectively.

The outlook for the business services sector is dependent on the health of the broader economy, which is currently quite favorable. The U.S. economy is benefiting from Trump administration’s business-friendly approach, including tax cuts and higher government spending. This has improved the employment scenario and aided manufacturing and non-manufacturing activities.

Key Releases on Oct 23

Investors interested in the business services stocks can watch out for three companies that are scheduled to report their third-quarter 2018 numbers tomorrow.

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 Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially if they have a negative Earnings ESP.

Based in Illinois, TransUnion TRU provides risk and information solutions.

The Zacks Consensus Estimate for third-quarter revenues is pegged at $616.57 million, indicating a 23.8% increase year over year. The top line is likely to be driven by growth in each of its operating segments — U.S. Information Services (USIS), International and Consumer Interactive — and contributions from incremental credit monitoring business from a competitor.

Contribution from acquisitions of DataLink services, FactorTrust and eBureau should benefit the top line. Other significant acquisitions such as Callcredit, iovation and Healthcare Payment Specialists — which were completed in the previous quarter — are expected to help TransUnion with new market entry and portfolio diversification.

A strong business model, focus on innovation, diversified revenue streams, significant operating leverage, low capital requirements, and solid cash flow are positives for the company.

The consensus mark for earnings is pegged at 63 cents per share, indicating year-over-year growth of 28.6%. Notably, the consensus estimate is above the company guided EPS range of 61-62 cents. Lower tax rate, resulting from Tax Cuts and Jobs Act, should boost the company’s bottom line in the to-be reported quarter.

TransUnion has an impressive earnings surprise history, having surpassed estimates in each of the trailing four quarters, with an average positive surprise of 5.4%.

The company’s Zacks Rank #3 and an Earnings ESP of +0.99% makes us reasonably confident of an earnings beat. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

TransUnion Price and EPS Surprise

 

TransUnion Price and EPS Surprise | TransUnion Quote

Based in California, Robert Half International Inc. RHI provides staffing and risk consulting services.

The Zacks Consensus Estimate for third-quarter revenues is pegged at $1.46 billion, indicating a 10.3% increase year over year. Notably, the consensus estimate is almost in line with the midpoint of the company’s guided range of $1.43-$1.49 billion.

The top line is expected to benefit from growth across the company’s U.S. as well as non-U.S. staffing and Protiviti operations, and positive business sentiment across the company’s small and mid-size client base. Additionally, Robert Half should benefit from an improving U.S. economy, which has led to an improvement in the employment scenario, and aided manufacturing and non-manufacturing activities. Favorable foreign currency movements are likely to act as another major tailwind. (Read more: Robert Half to Report Q3 Earnings: What's in Store?)

The consensus mark for earnings is pegged at 91 cents per share, indicating year-over-year growth of 33.8%. Notably, the consensus estimate is almost in line with the midpoint of the company guided EPS range of 88-94 cents. The Tax Cuts and Jobs Act (which reduced corporate tax rates significantly) should boost the company’s bottom line.

Robert Half boasts an attractive earnings surprise history, having surpassed estimates in three of the trailing four quarters, with an average positive surprise of 4%.

However, the company has a Zacks Rank #3 and an Earnings ESP of 0.00%, which makes surprise prediction difficult.

Robert Half International Inc. Price and EPS Surprise

 

Robert Half International Inc. Price and EPS Surprise | Robert Half International Inc. Quote

Based in Georgia, Total System Services, Inc. TSS provides payment processing, merchant, and related payment services to financial and nonfinancial institutions worldwide.

The Zacks Consensus Estimate for third-quarter revenues is pegged at $947.62 million, indicating year-over-year decrease of 24%. The expected decrease is due to adoption of Accounting Standards Codification (ASC) 606.

The consensus estimate for adjusted earnings is pegged at $1.10 per share, indicating year-over-year growth of 25%. Lower tax rate (as a result of Tax Cuts and Jobs Act) is likely to boost the bottom line.

Total System Services boasts an attractive earnings surprise history, having surpassed estimates in each of the trailing four quarters, with an average positive surprise of 7.7%.

Currently, the company has a Zacks Rank #3 and an Earnings ESP of -1.37%. However, when we issued our earnings preview article, the Earnings ESP was -2.28%.

Total System Services, Inc. Price and EPS Surprise

 

Total System Services, Inc. Price and EPS Surprise | Total System Services, Inc. Quote

Upcoming Releases

Investors interested in the broader Business Services sector are also awaiting earnings reports of key players like Automatic Data Processing ADP, Waste Management WM and Republic Services RSG. While Automatic Data Processing will report first-quarter fiscal 2019 results on Oct 31, Waste Management and Republic Services will release third-quarter 2018 results on Oct 25.

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TransUnion (TRU) : Free Stock Analysis Report
 
Robert Half International Inc. (RHI) : Free Stock Analysis Report
 
Automatic Data Processing, Inc. (ADP) : Free Stock Analysis Report
 
Total System Services, Inc. (TSS) : Free Stock Analysis Report
 
Waste Management, Inc. (WM) : Free Stock Analysis Report
 
Republic Services, Inc. (RSG) : Free Stock Analysis Report
 
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