For Immediate Release
The outsourcing industry stands to benefit from the increased adoption of cloud computing and other emerging technologies. These factors drive competitive advantage, increase innovation, improve speed-to-market and boost performance within the industry. Further, the wider application of artificial intelligence should lower complications and simplify operations. Industry players are in the process of modernizing their traditional legacy-oriented business processes to keep themselves flexible in any kind of operating environment.
The rising demand for expertise in improving efficiency and reducing costs has been aiding the industry over the past several years. The industry has witnessed growth in revenues, income and cash flow over the past few years, enabling most players to pursue acquisitions and other investments as well as pay out stable dividends.
Automatic Data Processing, Inc., Paychex, Inc. and Genpact Ltd. are some of the stocks that are likely to gain from the above-mentioned favorable industry trends. However, escalating data security issues, thanks to excessive dependency on technology, are concerns for the industry.
The buoyancy in the industry is further confirmed by its Zacks Industry Rank #50, which places it in the top 20% of more than 250 Zacks industries.
3 Outsourcing Stocks to Buy Now
Given this encouraging backdrop, it would be a good idea to zero in on outsourcing stocks that have strong growth potential for 2022. Here we present three promising Zacks Rank #2 (Buy) outsourcing stocks, which have a solid expected earnings growth rate for the current year, witnessed upward estimate revisions in the past 90 days and have a strong trailing four-quarter average earnings surprise history.
Additionally, these stocks have a solid long-term (three to five years) expected earnings growth rate. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Automatic Data Processing: This New Jersey-based provider of cloud-based human capital management solutions, continues to enjoy a dominant position in the human capital management market through strategic buyouts like Celergo, WorkMarket, Global Cash Card and The Marcus Buckingham Company. It has a strong business model, high recurring revenues, good margins, robust client retention and low capital expenditure. Further, it continues to innovate, improve operations and invest in its ongoing transformation efforts.
Further, ADP raised its fiscal 2022 outlook. The company now expects revenues to register 9-10% growth compared with the expected prior growth rate of 8-9%. Adjusted EPS is now expected to register 15-17% growth compared with the prior expected growth rate of 12-14%. The company now expects Employer Services revenues to grow at a rate of about 7% compared with the prior expected growth rate of about 6% and PEO Services revenues at a rate of 14-15% compared with the prior growth rate of 13% to 15%.
The Zacks Consensus Estimate for ADP's 2022 EPS has moved up 2.2% in the past 90 days. Its expected earnings growth rate for the year is 15.8%. Additionally, it has a long-term (three to five years) expected earnings growth rate of 12%. Automatic Data Processing has a trailing four-quarter earnings surprise of 6.2%, on average.
ADP stock has gained 7.3% over the past year. It has a market capitalization of $87.22 billion.
Paychex: This New York-based provider of integrated human capital management solutions recently declared a dividend hike of 20%, thereby raising its quarterly cash dividend from 66 cents per share to 79 cents. The dividend will be paid out on May 26 to shareholders of record as of May 12, 2022.
The raised fiscal 2022 guidance is another notable tailwind. Total revenues are now expected to register 12-13% growth compared with the prior expectation of 10-11%. Adjusted earnings per share are now expected to register 22.5-23% growth compared with the prior expectation of 18-20%. The adjusted operating margin is expected to be almost 40% compared with the prior expectation of 39-40%. The adjusted EBITDA margin is now expected to be nearly 44-45% compared with the prior expectation of 44%.
Paychex looks strong on the back of solid top-line growth and a dominant position in the outsourcing market. Strength across Management Solutions and Professional Employer Organization and Insurance Solutions revenues are likely to aid the company's top-line performance. Buyouts expand the company's customer base and generate cost and revenue synergies.
The Zacks Consensus Estimate for Paychex's 2022 EPS has moved up 3% in the past 90 days. The company's expected earnings growth rate for the current year is 23.4%. Additionally, it has a long-term (three to five years) expected earnings growth rate of 7.5%. Paychex has a trailing four-quarter earnings surprise of 10.8%, on average.
Paychex stock has gained 19.9% over the past year. It has a market capitalization of $43.21 billion.
Genpact: This Bermuda-based provider of business process outsourcing and information technology services has raised its 2022 guidance.Total revenues are now anticipated between $4.325 billion and $4.4 billion compared with the prior guidance of $4.3-$4.4 billion. Global Client revenue growth is now expected in the range of 9-11%, or 11%-13% on a constant currency basis, compared with the prior guidance of 8%-11%, or 9%-12% on a constant currency basis. Adjusted EPS is now anticipated between $2.60 and $2.76 compared with the prior guidance of $2.53-$2.71.
The company continues to enjoy a competitive position in the BPO services market based on domain expertise in business analytics, digital and consulting. Buyouts boost customer base and drive top-line growth. Artificial Intelligence offers ample growth opportunities. Genpact is benefitting from its strong clientele across the world. Consistency in dividend payments and share repurchases boost investor confidence and positively impact earnings per share.
The Zacks Consensus Estimate for Genpact's 2022 EPS has moved up 0.8% in the past 90 days. The company's expected earnings growth rate for the current year is 8.9%. Additionally, it has a long-term (three to five years) expected earnings growth rate of 12.3%. Genpact has a trailing four-quarter earnings surprise of 13.3%, on average.
Genpact has a market capitalization of $7.97 billion.
Why Haven't You Looked at Zacks' Top Stocks?
Our 5 best-performing strategies have blown away the S&P's impressive +28.8% gain in 2021. Amazingly, they soared +40.3%, +48.2%, +67.6%, +94.4%, and +95.3%. Today you can access their live picks without cost or obligation.
Join us on Facebook: https://www.facebook.com/ZacksInvestmentResearch/
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Zacks Investment Research
800-767-3771 ext. 9339
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
Just Released: Zacks Top 10 Stocks for 2022
In addition to the investment ideas discussed above, would you like to know about our 10 top picks for the entirety of 2022?
From inception in 2012 through 2021, the Zacks Top 10 Stocks portfolios gained an impressive +1,001.2% versus the S&P 500’s +348.7%. Now our Director of Research has combed through 4,000 companies covered by the Zacks Rank and has handpicked the best 10 tickers to buy and hold. Don’t miss your chance to get in…because the sooner you do, the more upside you stand to grab.See Stocks Now >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Paychex, Inc. (PAYX): Free Stock Analysis Report
Automatic Data Processing, Inc. (ADP): Free Stock Analysis Report
Genpact Limited (G): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.