The widely-diversified Zacks Business Services sector, which houses consulting, outsourcing, staffing and waste management companies, to name a few, is a major beneficiary of economic health. It was one of the sectors to be hardly hit by the pandemic when business activities came to a near standstill in the first half of 2020.
The sector started bouncing back with lockdown relaxations and its steady recovery continued through the fourth quarter of 2020, thanks to the improving economy, and expanding manufacturing and non manufacturing activities.
In the December-end quarter, the sector benefited from growth in services pertaining to transportation, warehousing, retail, wholesale, professional, technical, information, finance, education and health care.
Recent Economic Numbers Encouraging
Economic activity in the manufacturing sector expanded 3.2% from November to December last year, as the PMI measured by Institute for Supply Management (ISM) touched 60.7%. This is the eighth consecutive month of expansion after April’s contraction that had interrupted an impressive growth rally of 131 consecutive months. Non-manufacturing activities clocked 1.3% growth from November to December, as the Services PMI measured by ISM touched 57.2%. This is the seventh consecutive month of expansion after a two-month period of contraction that followed 122 straight months of expansion.
The latest third-quarter GDP number, which according to the “third” estimate released by the Bureau of Economic Analysis, increased at an annual rate of 33.4% against a 31.4% decline in the second quarter of 2020.
Q4 Earnings Expectations From the Sector
The sector is still significantly weak compared with the pre-pandemic level as spaces like accommodation, food services, entertainment, recreation, rental and leasing continue to struggle with depressed demand.
The latest Earnings Outlook suggests that earnings numbers for the S&P 500 members of the business services sector will reflect a 9.3% year-over-year drop for the October-December quarter, while revenues are estimated to display a 3.4% decline. This, however, compares favorably with the 4.4% and 3.6% drop in earnings and revenues in the third quarter of 2020, respectively.
Sneak Peek Into Upcoming Earnings Releases
Here we discuss four business services companies scheduled to report quarterly results on Jan 28.
Our quantitative model suggests that a company needs the right combination of the following two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better — to increase the odds of a positive earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Visa V: This California-based payments technology company is scheduled to release first-quarter fiscal 2021 results after the bell.
The Zacks Consensus Estimate for revenues is pegged at $5.52 billion, suggesting a decline of 8.8% from the year-ago quarter’s reported figure. The consensus estimate for earnings is pinned at $1.27, indicating a year-over-year decline of 13%.
Visa has an Earnings ESP of +0.36% and presently carries a Zacks Rank #3. (Read more: Visa Gears Up for Q1 Earnings: What’s in the Cards?)
Visa Inc. Price and EPS Surprise
Mastercard MA: This New York-based provider of transaction processing and other payment-related products and services is slated to report fourth-quarter numbers before the bell.
The Zacks Consensus Estimate for Mastercard’s revenues of $4 billion suggests a 9.4% decrease from the year-ago reported figure. Likewise, the consensus estimate for earnings of $1.51 per share calls for a 23% decline, year on year.
Mastercard has an Earnings ESP of -0.77% and currently carries a Zacks Rank #3. (Read more: What’s in Store for Mastercard This Earnings Season?)
Mastercard Incorporated Price and EPS Surprise
Robert Half RHI: This California-based staffing and risk consulting services company is scheduled to announce quarterly figures after market close.
The Zacks Consensus Estimate for revenues of $1.21 billion calls for a 21.4% decrease from the year-ago reported figure. Likewise, the consensus mark for earnings of 68 cents per share indicates a 30.6% year-over-year plunge.
Robert Half has an Earnings ESP of 0.00% and holds a Zacks Rank of 3, at present. (Read more: Robert Half (RHI) to Report Q4 Earnings: What’s in Store?)
Robert Half International Inc. Price and EPS Surprise
Robert Half International Inc. price-eps-surprise | Robert Half International Inc. Quote
Alliance Data Systems Corporation ADS: This Ohio-based data-driven marketing and loyalty solutions provider will report fourth-quarter numbers before market close.
The Zacks Consensus Estimate for Alliance Data’s revenues of $1.12 billion suggests a 23.2% decrease from the year-ago reported figure. Likewise, the consensus estimate for earnings of $2.48 per share calls for a 39.8% fall, year on year.
Alliance Datahas an Earnings ESP of -1.95% and carries a Zacks Rank #3, currently. (Read more: Alliance Data to Report Q4 Earnings: What’s in Store?)
Alliance Data Systems Corporation Price and EPS Surprise
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