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3 Service Firms Poised to Beat Estimates This Earnings Season
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The Zacks Business Services sector is expected to have performed well in the first quarter of 2023, driven by a strong demand environment and improving supply chains. However, inflationary pressure and labor market constraints remained headwinds.
Per the latest Earnings Trend report, earnings of S&P 500 members of the business services sector that have reported results this season grew 1.3% year over year on 5.7% revenue growth, with 87% of the companies beating EPS estimates and 82.6% topping sales projections.
Total quarterly earnings of the S&P 500 members of the sector are currently anticipated to display 1.4% year-on-year growth. Revenues are likely to witness a 6.1% rise.
Let us discuss the factors that are expected to have played a key role in shaping the performance of business services companies in the quarter.
Key Factors to Consider for Service Stocks
Economic activities in the non-manufacturing sector were in good shape in the quarter. The Services PMI measured by the Institute for Supply Management was 51.9% in April, 0.7% higher than the March reading of 51.2%, indicating expansion for the fourth consecutive month.
Sector-specific factors that acted as tailwinds in the quarter are the essentiality of certain services like waste management, the rise in demand for risk mitigation and consulting services, increased expertise in improving operational efficiency and lower costs, successful work-from-home models and digital transformation.
Services pertaining to transportation & warehousing; accommodation & food; utilities; construction; rental & leasing; health care & social assistance; education; information; professional, scientific & technical stayed healthy in the quarter.
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 on 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. You can see the complete list of today’s Zacks #1 Rank stocks here.
Earnings ESP is our proprietary methodology for determining stocks that have the best chances to surprise in 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.
Amplitude, Inc. (AMPL - Free Report) : The company provides a digital analytics platform for the analysis of customer behavior within digital products globally.
Amplitude is set to report its first-quarter 2023 results on May 9. It has an Earnings ESP of +21.88% and currently carries a Zacks Rank #3. The Zacks Consensus Estimate for the bottom line in the to-be-reported quarter has moved 17% north in the past 60 days.
The consensus mark for the top line in the to-be-reported quarter is pegged at $65 million, indicating year-over-year growth of 22.5%. The consensus mark for the bottom line is pegged at a loss of 6 cents, indicating a decrease of 14.3% in loss on an year-over-year basis.
Aris Water Solutions, Inc. (ARIS - Free Report) is an environmental infrastructure and solutions company that provides water handling and recycling solutions.
Aris Water is scheduled to report its first-quarter 2023 results on May 8. It has an Earnings ESP of +11.12% and currently carries a Zacks Rank #3. The Zacks Consensus Estimate for the to-be-reported quarter has moved 52.4% south in the past 60 days.
The consensus mark for revenues in the to-be-reported quarter is pegged at $81.9 million, indicating year-over-year growth of 15.4%. The consensus mark for the bottom line is pegged at 10 cents, indicating a decrease of 84.6% on an year-over-year basis.
PagSeguro Digital Ltd. (PAGS - Free Report) : The company is a provider of financial technology solutions and services.
PagSeguro is expected to report its first-quarter 2023 results soon. It has an Earnings ESP of +3.70% and a Zacks Rank #3. The Zacks Consensus Estimate for the to-be-reported quarter has remained unchanged in the past 60 days.
The consensus mark for revenues in the to-be-reported quarter is pegged at $697.5 million, indicating year-over-year growth of 6.4%. The consensus mark for the bottom line is pegged at 20 cents, indicating a decrease of 4.8% on a year-over-year basis.
Image: Bigstock
3 Service Firms Poised to Beat Estimates This Earnings Season
The Zacks Business Services sector is expected to have performed well in the first quarter of 2023, driven by a strong demand environment and improving supply chains. However, inflationary pressure and labor market constraints remained headwinds.
Per the latest Earnings Trend report, earnings of S&P 500 members of the business services sector that have reported results this season grew 1.3% year over year on 5.7% revenue growth, with 87% of the companies beating EPS estimates and 82.6% topping sales projections.
Total quarterly earnings of the S&P 500 members of the sector are currently anticipated to display 1.4% year-on-year growth. Revenues are likely to witness a 6.1% rise.
Let us discuss the factors that are expected to have played a key role in shaping the performance of business services companies in the quarter.
Key Factors to Consider for Service Stocks
Economic activities in the non-manufacturing sector were in good shape in the quarter. The Services PMI measured by the Institute for Supply Management was 51.9% in April, 0.7% higher than the March reading of 51.2%, indicating expansion for the fourth consecutive month.
Sector-specific factors that acted as tailwinds in the quarter are the essentiality of certain services like waste management, the rise in demand for risk mitigation and consulting services, increased expertise in improving operational efficiency and lower costs, successful work-from-home models and digital transformation.
Services pertaining to transportation & warehousing; accommodation & food; utilities; construction; rental & leasing; health care & social assistance; education; information; professional, scientific & technical stayed healthy in the quarter.
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 on 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. You can see the complete list of today’s Zacks #1 Rank stocks here.
Earnings ESP is our proprietary methodology for determining stocks that have the best chances to surprise in 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.
Amplitude, Inc. (AMPL - Free Report) : The company provides a digital analytics platform for the analysis of customer behavior within digital products globally.
Amplitude is set to report its first-quarter 2023 results on May 9. It has an Earnings ESP of +21.88% and currently carries a Zacks Rank #3. The Zacks Consensus Estimate for the bottom line in the to-be-reported quarter has moved 17% north in the past 60 days.
The consensus mark for the top line in the to-be-reported quarter is pegged at $65 million, indicating year-over-year growth of 22.5%. The consensus mark for the bottom line is pegged at a loss of 6 cents, indicating a decrease of 14.3% in loss on an year-over-year basis.
Amplitude, Inc. Price and EPS Surprise
Amplitude, Inc. price-eps-surprise | Amplitude, Inc. Quote
Aris Water Solutions, Inc. (ARIS - Free Report) is an environmental infrastructure and solutions company that provides water handling and recycling solutions.
Aris Water is scheduled to report its first-quarter 2023 results on May 8. It has an Earnings ESP of +11.12% and currently carries a Zacks Rank #3. The Zacks Consensus Estimate for the to-be-reported quarter has moved 52.4% south in the past 60 days.
The consensus mark for revenues in the to-be-reported quarter is pegged at $81.9 million, indicating year-over-year growth of 15.4%. The consensus mark for the bottom line is pegged at 10 cents, indicating a decrease of 84.6% on an year-over-year basis.
Aris Water Solutions, Inc. Price and EPS Surprise
Aris Water Solutions, Inc. price-eps-surprise | Aris Water Solutions, Inc. Quote
PagSeguro Digital Ltd. (PAGS - Free Report) : The company is a provider of financial technology solutions and services.
PagSeguro is expected to report its first-quarter 2023 results soon. It has an Earnings ESP of +3.70% and a Zacks Rank #3. The Zacks Consensus Estimate for the to-be-reported quarter has remained unchanged in the past 60 days.
The consensus mark for revenues in the to-be-reported quarter is pegged at $697.5 million, indicating year-over-year growth of 6.4%. The consensus mark for the bottom line is pegged at 20 cents, indicating a decrease of 4.8% on a year-over-year basis.
PagSeguro Digital Ltd. Price and EPS Surprise
PagSeguro Digital Ltd. price-eps-surprise | PagSeguro Digital Ltd. Quote