5 Business Services Stocks Up for Earnings Beat This Season

The third quarter witnessed the economy re-opening gradually with ease of restrictions, and both manufacturing and non-manufacturing activities getting a boost. Given its high dependency on economic activity, demand of services from the business services sector revived and stayed in a fairly healthy state during the July-September period.

Notably, economic activity in the service sector expanded 0.9% from August to September as the Services PMI measured by ISM touched 57.8%. This is the fifth consecutive month of expansion after April’s contraction that had interrupted an impressive growth rally of 131 consecutive months.

Although manufacturing activities edged down 0.6% from August to September, with the Purchasing Managers Index (PMI) measured by Institute for Supply Management (ISM) touching 55.4%, the reading stayed well above 50 — reflecting growth in the manufacturing sector. This is the fourth consecutive month of expansion after a two-month period of contraction that followed 122 straight months of expansion.

Q3 Tailwinds

Increasing adoption and success of the work-from-home model, rising demand for risk mitigation and consulting, and expertise to improve operational efficiency and reduce costs have boosted the demand environment for services like consulting, outsourcing, technology, business-information, advertising and marketing.

Further, gains witnessed in retail trade, professional and business services, leisure and hospitality, and education and health services aided the staffing space. Unemployment rate fell 0.5% in September and the number of unemployed persons decreased by 1 million to 12.6 million. Both metrics reflected a downside for the fifth straight month.

Selecting Stocks Poised to Beat

With the existence of a number of industry players, finding the right business services stocks that have the potential to beat earnings can be daunting. Our proprietary methodology, however, makes it fairly simple.

You could narrow down the list of choices by looking at stocks that have the combination of a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP is our proprietary methodology for determining stocks that have the best chance to surprise with their next earnings announcement. It is the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate.

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

Our Choices

Provider of intelligent systems for wealth management and financial wellness Envestnet, Inc. ENV will report third-quarter 2020 results on Nov 5. The company has an Earnings ESP of +2.35% and currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Envestnet, Inc Price and EPS Surprise

Envestnet, Inc Price and EPS Surprise

Envestnet, Inc price-eps-surprise | Envestnet, Inc Quote

Provider of management and technology consulting, analytics, engineering, digital, mission operations, and cyber solutions Booz Allen Hamilton Holding Corporation BAH has an Earnings ESP of +3.64% and carries a Zacks Rank #3, at present. The company will announce second-quarter fiscal 2021 figures on Oct 30.

Booz Allen Hamilton Holding Corporation Price and EPS Surprise

Booz Allen Hamilton Holding Corporation Price and EPS Surprise

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

Non-hazardous solid waste collection, transfer, disposal, recycling, and environmental services provider Republic Services, Inc. RSG has an Earnings ESP of +1.93% and holds a Zacks Rank #3, currently. The company is scheduled to release quarterly numbers on Nov 5.

Republic Services, Inc. Price and EPS Surprise

Republic Services, Inc. Price and EPS Surprise

Republic Services, Inc. price-eps-surprise | Republic Services, Inc. Quote

Entertainment and technology solutions Everi Holdings Inc. EVRI will report third-quarter figures on Nov 2. The company has an Earnings ESP of +27.33% and presently carries a Zacks Rank #3.

Everi Holdings Inc. Price and EPS Surprise

Everi Holdings Inc. Price and EPS Surprise

Everi Holdings Inc. price-eps-surprise | Everi Holdings Inc. Quote

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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.

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