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Government Services Industry Momentum Continues: 3 Top Picks

Shuvra Shankar Dey

The Government Services industry has outpaced the S&P 500 Index so far this year.

The industry, which is placed in the top 1% of more than the 250 Zacks industries, has rallied 31.1% in the said time frame, comfortably surpassing the index’s rise of 16.2%. The outperformance can be attributed to higher government spending that benefited government service providers.

The bipartisan budget agreement has encouraged several federal bodies to increase their spending and is helping industry players to improve their contract win rates. They are seeing steady demand from federal, state/local and international government clients mainly for digital transformation and energy market services.

Notably, government leaders’ views on the role of technology in government functions have changed. Digital revolution has accelerated technology adoption in government processes.

Emerging digital lifecycle of consumers has become a major driver of the smart government market, which includes government resource planning system, security, analytics, network management, open data platform and remote monitoring. This is boosting demand for and facilitating the adoption of smart technologies, thereby driving investments in the government services market.

3 Firms to Invest In

The industry comprises companies that offer business process services, technology, management, marketing and policy consulting, engineering, analytics, digital, mission operations, and cyber solutions to governments.

With the help of the Zacks Stock Screener, we have zeroed in on three promising stocks from the industry, which have a favorable Zacks Rank #1 (Strong Buy) or 2 (Buy). These stocks also have a solid expected earnings growth rate for the current year and have witnessed upward earnings estimate revisions in the past 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.

Booz Allen Hamilton Holding Corporation BAH is a provider of management and technology consulting, engineering, digital, analytics, mission operations and cyber solutions to governments, corporations and not-for-profit organizations.

The company is currently implementing Vision 2020, a strategy aimed at countering competition and achieving sustainable long-term growth. The strategy focuses on getting closer to clients’ core missions, increasing technical content of work, attracting and retaining talent from diverse areas of expertise, increasing innovation, creating a wide network of external partners and alliances and expansion into commercial and international business.

Through implementation of Vision 2020, Booz Allen is seeing significantly higher backlog growth, a shift in talent to more technical expertise, strong performance in the global commercial market as well as disciplined acquisition.

Booz Allen currently carries a Zacks Rank #2 and has a market capitalization of $9.3 billion. The company’s expected earnings growth rate for fiscal 2020 is 9.1%. The Zacks Consensus Estimate for fiscal 2020 has improved 1.7% in the past 60 days.

Booz Allen Hamilton Holding Corporation Price, Consensus and EPS Surprise

Booz Allen Hamilton Holding Corporation Price, Consensus and EPS Surprise

Booz Allen Hamilton Holding Corporation price-consensus-eps-surprise-chart | Booz Allen Hamilton Holding Corporation Quote

ICF International, Inc. ICFI is a provider of management, technology, marketing, and policy consulting and implementation services to government and commercial clients.

The company’s strong global presence in diverse markets and its robust, long-term relationships with clients continue to drive sales. Management continues to implement a strategy to diversify the company’s revenue base by striving to serve clients in multiple markets.

Its involvement in small Community Development Block Grant (CDBG) projects should help ICF win larger projects related to disaster relief in the near- to intermediate-term. Several states are expanding their energy efficiency goals, creating new opportunities for ICF to win energy efficiency-related contracts from utilities going forward.

ICF currently carries a Zacks Rank #2 and has a market capitalization of $1.4 billion. The company’s expected earnings growth rate for 2019 is 11.8%. The Zacks Consensus Estimate for 2019 has improved 0.2% in the past 60 days.

ICF International, Inc. Price, Consensus and EPS Surprise

ICF International, Inc. Price, Consensus and EPS Surprise

 

ICF International, Inc. price-consensus-eps-surprise-chart | ICF International, Inc. Quote

MAXIMUS, Inc. MMS provides business process services (BPS) to government health and human services programs globally.

The company’s ability to deliver cost effective, efficient and high-scale solutions strengthen its position as a BPS provider.It continues to execute on its three-pronged strategy of digital transformation, clinical evolution and market expansion.

The company is developing new solution sets aimed at achieving operational and cost efficiencies through techniques such as cloud migration services, artificial intelligence, robotic process automation (RPA) and digital automation. It is implementing new digital innovations within business process management and as direct service offerings to enhance the portfolio of citizen services and federal capabilities. On the clinical front, MAXIMUS has undertaken work as a subcontractor, performing medical record indexing and providing outreach and engagement services.

MAXIMUS currently carries a Zacks Rank #2 and has a market capitalization of $4.8 billion. The company’s expected earnings growth rate for fiscal 2019 is 8.8%. The Zacks Consensus Estimate for fiscal 2019 has improved 1.1% in the past 60 days.

Maximus, Inc. Price, Consensus and EPS Surprise

Maximus, Inc. Price, Consensus and EPS Surprise

Maximus, Inc. price-consensus-eps-surprise-chart | Maximus, Inc. Quote

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