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The U.S. economy had to bear the brunt of the coronavirus pandemic last year, with the service side of the economy taking a severe beating. The virus outbreak led to business restrictions and shutdown measures, impacting restaurants and bars. In fact, consumers stayed away from venues that generally attract crowds. As a result, the pandemic compelled people to spend more on goods than services.
But now things have started to look up for the beleaguered service sector. This is primarily because of the breakthrough in the vaccine front, which many believe if properly distributed, will eventually control the outbreak and bolster the economy. What’s more, the Biden administration promised further stimulus packages to lift the economy, which gave a jump-start to service providers early in 2021.
No doubt, businesses are in good health this year compared to last year, and service companies have started off well with many remaining optimistic about an even better performance in the near future. The non-manufacturing index of the Institute of Supply Management (ISM) jumped to 58.7% in January from 57.7% in December, a two-year high.
In fact, the non-manufacturing index is at present above its pre-pandemic level. Also, it’s in expansionary mode since any reading above 50% signifies growth. Actually, any reading above 55% predominantly indicates broad strength, as mentioned in a MarketWatch article.
The ISM further added that the new orders index climbed to a six-month high of 61.8% last month compared to a reading of 58.6% in December. Notably, the measure of new orders for materials increased for the eighth successive month.
By the way, an uptick in new orders helped business activities to pick up. ISM’s business activity index, in January, registered 59.9% growth of 59.9% even though it’s a drop of 0.6% from the prior month.
Nonetheless, measure of employment, a significant part of the survey, rose last month following a contraction in December. ISM’s employment index of the service sector was 55.2% in January versus48.7% in December. This was also the highest reading in almost a year and showed that service-oriented companies hired employees last month as several government curbs were lifted.
Lastly, Anthony Nieves, Chair of the ISM Services Business Survey Committee, said that “there was continued growth in the services sector for the month of January. Respondents’ comments are more optimistic about business conditions and the economy.”
Similarly, another survey on service side of the economy was also strong in January. According to IHS Markit, it’s U.S. Services Purchasing Managers’ Index came in at 58.3 last month, up from 54.8 in December, as quoted in a Morningstar article.
The report further stated that demand for new orders increased as service-oriented businesses returned back to normal, and service provider exhibited enough confidence about future business prospects as well.
US Service Sector Growth Accelerates: 5 Big Gainers
The aforesaid data, without any doubt, showed that this year, the U.S. service side of the economy is already up and running. Thus, placing bets on solid stocks from the said sector seems judicious at this moment. We have, thus, selected five such stocks that might make meaningful additions to your portfolio. These stocks at present flaunt a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
CoreLogic, Inc. CLGX is a leading provider of property information, analytics, and data-enabled software platforms and services. The Zacks Consensus Estimate for its current-year earnings has risen5.5% over the past 60 days. The company’s expected earnings growth rate for the current year is 35.7%.
Cincinnati Bell Inc CBB is a full-service regional provider of data and voice communications services over wireline and wireless networks. The Zacks Consensus Estimate for its current-year earnings has moved up11% over the past 60 days. The company’s expected earnings growth rate for the current year is 15.7%.
Black Knight Financial Services, Inc. BKI operates through the Technology and Data and Analytics business segments. The technology segment, in particular, offers software and hosting solutions which support loan servicing, loan origination and settlement services. The Zacks Consensus Estimate for its current-year earnings has climbed0.5% over the past 60 days. The company’s expected earnings growth rate for the current year is 4%.
The Blackstone Group Inc BX is an asset manager of alternative investments and a provider of financial advisory services. The Zacks Consensus Estimate for its current-year earnings has moved11.6% up over the past 60 days. The company’s expected earnings growth rate for the current year is 20%.
CACI International, Inc. CACI provides information solutions and services in North America and internationally. The Zacks Consensus Estimate for its current-year earnings has moved2% north over the past 60 days. The company’s expected earnings growth rate for the current year is 20.2%.
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