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5 Great Business Services Stocks to Buy Ahead of Q1 Earnings


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As markets growth increasingly volatile, fueled primarily by inflationary fears, it is easy to forget that the economy remains on a firm footing. Fresh evidence of this fact was provided by the ADP report for April which revealed that job additions had come in above 200,000 for the six straight month. Incidentally, professional and business services contributed nearly half of all the job additions experienced during April.

Moreover, the outlook of the business services sector is firmly tied to the broader economy. It is widely expected that the business friendly approach of the Trump administration will provide a further boost to the U.S. economy.

Further, earnings and revenues from the sector are likely to improve in the first quarter, which makes it a good idea to pick up select business services stocks which are also slated to outperform their earnings estimates.

Professional and Business Services Lead Job Additions

In April, private sector job additions came in at 204,000, according to a report from ADP and Moody's Analytics. The figure was in line with most expectations, though it does represent a decline from the 228,000 additions made in March, revised downward from the initial figure of 241,000.

According to co-head of the ADP Research Institute, Ahu Yildirmaz, job additions made by the professional and business services sector "accounted for more than half of all jobs" added during April. At 58,000, the figure is much higher than the number of jobs added by education and health or leisure and hospitality, which amounted to 39,000 and 36,000, respectively.

This is yet another indicator of the growing importance of the business services sector, particularly in the United States and the greater North American region. According to the Professional Services Global Market Report for 2018, North America contributed 37% of total demand for professional services in 2017. This was likely due to huge demand for legal, accounting and other professional services across all major business sectors.

Resilient Economy, Trump's Policies to Aid Sector

Currently, the U.S. economy is on a firm footing with stable GDP levels, an improving employment scenario, inflation hitting 2% and momentum gained by oil prices . The Trump administration remains focused on improving the ease of doing business, exemplified by recently passed tax cuts. It is widely expected that it will pursue its agenda of deregulation aggressively.

Moreover, total Q1 earnings for the business services sector are expected to be up 17.1% on 5.2% higher revenues as of Apr 27, 2018. That's far better than the more vaunted autos and conglomerates sectors, earnings for which are expected to decline by 0.8% and increase by 3%, respectively during the first quarter. Overall, total Q1 earnings are expected to be up 22.6% from the same period last year on 8.4% higher revenues. (Read: Q1 Earnings Season Good, But Not Great )

Our Choices

The Trump administration's business friendly approach and a strong economy are likely to provide a major fillip to the business services sector in the months ahead. Taken together, these factors ensure that business services stocks remain a strong investment option in 2018.

Earnings ESP is our proprietary methodology for identifying stocks that have high chances of surprising with their next earnings announcement. It shows the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they're reported with our  Earnings ESP Filter .

You could further narrow down the list of choices by looking at stocks that have a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). You can see  the complete list of today's Zacks #1 Rank stocks here.

Our research shows that for stocks with this combination, the chance of a positive earnings surprise is as high as 70%.

Black Knight, Inc.BKI engages in the provision of integrated technology, workflow automation and data and analytics to the mortgage and real estate industries.

Black Knight has beaten the Zacks Consensus earnings estimate in two of the last four quarters with an average positive earnings surprise of 2.2%.

Powered with the right combination of the two key ingredients - an Earnings ESP of +1.53% and a Zacks Rank of 2 - our proven model shows that an earnings beat is expected for Black Knight in the to-be-reported quarter as well.

The company is expected to report first-quarter 2018 results on May 7.

Delphi Technologies PLCDLPH develops, designs and manufactures powertrain technologies for original equipment manufacturers.

Powered with the right combination of the two key ingredients - an Earnings ESP of +0.98% and a Zacks Rank of 2 - our proven model shows that an earnings beat is expected for Delphi Technologies in the to-be-reported quarter as well.

The company is expected to report first-quarter 2018 results on May 9.

Ritchie Bros. Auctioneers IncorporatedRBA conducts unreserved public auctions every year at locations throughout North and Central America, Europe, Asia, Australia, Africa and the Middle East.

Powered with the right combination of the two key ingredients - an Earnings ESP of +4.75% and a Zacks Rank of 2 - our proven model shows that an earnings beat is expected for Ritchie Bros. Auctioneers in the to-be-reported quarter as well.

The company is expected to report first-quarter 2018 results on May 10.

Thomson Reuters CorporationTRI is a leading provider of information and news to professional markets across the world.

Thomson Reuters has beaten the Zacks Consensus earnings estimate in all of the last four quarters with an average positive earnings surprise of 14.3%.

Powered with the right combination of the two key ingredients - an Earnings ESP of +23.38% and a Zacks Rank of 2 - our proven model shows that an earnings beat is expected for Thomson Reuters in the to-be-reported quarter as well.

The company is expected to report first-quarter 2018 results on May 11.

Booz Allen Hamilton Holding CorporationBAH is engaged in providing management and technology consulting services to the U.S. government in the defense, intelligence and civil markets.

Booz Allen Hamilton has beaten the Zacks Consensus earnings estimate in all of the last four quarters with an average positive earnings surprise of 8.4%.

Powered with the right combination of the two key ingredients - an Earnings ESP of +4.74% and a Zacks Rank of 2 - our proven model shows that an earnings beat is expected for Booz Allen Hamilton in the to-be-reported quarter as well.

The company is expected to report fourth-quarter fiscal 2018 results on May 29.

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Thomson Reuters Corp (TRI): Free Stock Analysis Report

Delphi Technologies PLC (DLPH): Free Stock Analysis Report

Ritchie Bros. Auctioneers Incorporated (RBA): Free Stock Analysis Report

Booz Allen Hamilton Holding Corporation (BAH): Free Stock Analysis Report

Black Knight Financial Services, Inc. (BKI): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Investing , Business , Earnings , Stocks
Referenced Symbols: TRI , DLPH , RBA , BAH , BKI


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