Looking back at the second quarter of 2021, we see the service sector steadily gathering steam. The sector continued rebounding from the pandemic-induced weakness, aided by the recovering economy, and manufacturing and non-manufacturing strength driven by the relaxation of restrictions and increased vaccination drives.

A steady recovery in GDP is evident from the latest second-quarter number, which according to the "advance" estimate released by the Bureau of Economic Analysis, increased at an annual rate of 6.5% compared with the first quarter’s 6.3% increase.

Although economic activity in the manufacturing sector decreased 1.1% from June to July with the Manufacturing PMI measured by Institute for Supply Management (ISM) touching 59.5%, the reading of above 50%, marked the 14th consecutive month of expansion after April 2020’s contraction that had interrupted an impressive growth rally of 131 consecutive months.

The April-June quarter witnessed growth in major manufacturing industries like computer & electronic products; machinery; electrical equipment, appliances & components; transportation equipment, food, beverage & tobacco products; printing & related support activities; and petroleum & coal products.

Non-manufacturing activities clocked 4% growth from June to July, as the Services PMI measured by ISM touched the all-time high of 64.1%. This is the 14th consecutive month of expansion after a two-month period of contraction that followed 122 straight months of expansion.

In the second quarter, notable growth came in from transportation & warehousing; management of companies & support services; retail trade; wholesale Trade; accommodation & food services; mining; utilities; construction; health Care & social assistance; finance & insurance; information; educational services; and professional, scientific & technical Services.

Stocks Poised to Beat This Season

With the existence of a number of players in the sector, 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 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 chances 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 an earnings surprise is as high as 70%.

Here are our picks.

Opendoor Technologies Inc. (OPEN Quick QuoteOPEN - Free Report) : This operator of a digital platform for residential real estate will report second-quarter results on Aug 11. The company has an earnings ESP of +2.86 and currently carries a Zacks Rank #2. The Zacks Consensus Estimate for the to-be-reported quarter’s bottom line has moved up 2.8% over the past 60 days.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Broadridge Financial Solutions, Inc. (BR Quick QuoteBR - Free Report) : This provider of investor communications and technology-driven solutions is set to release quarterly figures on Aug 12. The company has an earnings ESP of +1.56 and carries a Zacks Rank #3, at present. The Zacks Consensus Estimate for the to-be-reported quarter’s earnings has remained unchanged at $2.19 in the past 60 days.

BTRS Holdings Inc. : This cloud-based software and integrated payment processing solutions provider’s second-quarter 2021 numbers will be out on Aug 11. The company has an earnings ESP of +62.5 and carries a Zacks Rank #3, currently. The Zacks Consensus Estimate for the to-be-reported quarter’s bottom line has remained unrevised at a loss of 8 cents in 60 days’ time.