The US services sector is benefiting from strong economic fundamentals. Despite record high interest rates, slowing inflation, and the Fed’s extremely tight monetary policy, the sector has recorded double-digit gains since the beginning of the year.
The industry is mature and demand for services is good. Sales, profits, and cash flows are expected to gradually return to pre-pandemic levels, which will enable most industry players to pay stable dividends.
The pandemic has changed the way industry players do business and provide services. The industry is now focused on funneling funds and efforts into more effective operational components such as technology, digital transformation, data-driven decision making, and improved cybersecurity.
To be well-positioned for the post-pandemic period and to better capitalize on the opportunities presented by the economic recovery, service providers are formulating and re-evaluating strategic initiatives and intensifying efforts to target end markets.
The stuffing industry has benefited from a robust labor market. The industry is increasingly using technology to streamline processes, increase efficiency, and provide better services. There is an increasing use of technology-enabled recruitment techniques such as AI, social media, and big data.
Rising labor costs due to competition in the talent market have created headwinds for the industry. However, rising immigration is helping service providers thrive due to the increased influx of foreign talent.
Our Top Picks
They narrowed our search to five business services stocks with high growth potential for the remainder of 2024. These stocks have seen positive earnings estimate revisions in the past 60 days. Each of our recommendations is accompanied by either a Zacks Rank #1 (Strong Buy) or 2 (Buy).
AppLovin Inc. (NASDAQ:APP) is building a software-based platform to help mobile app developers better market and monetize their apps in the U.S. and internationally. APP provides a technology platform that enables developers to market, monetize, analyze and publish their apps.
Zacks Rank #1 AppLovin’s revenue and earnings growth rates for the current fiscal year are expected to be 31.7% and over 100%, respectively. The Zacks Consensus Estimate for current fiscal year earnings has improved 8.4% over the past 30 days.
Booz Allen Hamilton Holding Corporation (NYSE:BAH) is benefiting from its Vision 2020 strategy, accelerating organic revenue growth, strengthening profitability and leading to a significant increase in employee headcount and backlog.
BAH’s VoLT strategy focuses on integrating speed, leadership and technology into the transformation process. BAH focuses on areas such as artificial intelligence, advanced technologies, directed energy and modern digital platforms.
Zacks Rank #2 Booz Allen Hamilton’s sales and earnings growth rates for the current fiscal year (ending March 2025) are expected to be 9.8% and 10%, respectively. The Zacks Consensus Estimate for current-quarter earnings has improved 1% over the past seven days.
Clean Harbors Inc.’s (NYSE:CLH) capital investments will improve the quality of its services and help it comply with state and local regulations. The acquisition will allow CLH to expand its business into multiple service areas.
CLH has a diverse client base ranging from Fortune 500 companies to small and mid-sized public and private companies, providing a stable and recurring revenue stream. Continuous share repurchases will strengthen investor confidence and help CLH’s earnings per share.
Clean Harbors, a Zacks Rank #2 company, is expected to post sales and earnings growth of 8.7% and 6.9%, respectively, for the current fiscal year. The Zacks Consensus Estimate for current-quarter earnings has improved 0.1% over the past 30 days.
Global Payments Inc. (NYSE:GPN) is benefiting from a robust contribution from its trading business. Rising demand for digital payment methods is expected to support GPN’s growing trading volumes.
The acquisition of EVO Payments will expand GPN’s capabilities, as recent quarterly results show. GPN’s positive outlook for 2024 further bolsters investor confidence. Revenues in 2024 are expected to grow 5.5% year over year.
Global Payments, a Zacks Rank #2 company, is expected to see revenue and earnings growth of 6.4% and 11.6%, respectively, for the current fiscal year. The Zacks Consensus Estimate for current-quarter earnings has improved 0.1% over the past 60 days.
Omnicom Group Inc. (NYSE:OMC) remains focused on its internal development initiatives. Consistency and diversity of operations and an increased focus on delivering customer-centric strategic business solutions will ensure continued profitability.
OMC’s revenues are benefiting from ongoing efforts to improve operational efficiencies across real estate, back-office services, procurement and IT. A change in OMC’s business mix resulting from the sale of certain non-core or underperforming agencies is positively impacting earnings.
Zacks Rank #2: Omnicom Group Inc.’s sales and earnings growth rates for the current fiscal year are expected to be 6.2% and 5.8%, respectively. The Zacks Consensus Estimate for current-quarter earnings has improved 1.4% over the past 60 days.
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