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Business Services Stocks' Earnings on Oct 31: ADP, APTV, FISV

Owing to its widely-diversified nature, the outlook for the business services sector is dependent on the health of the broader economy, which is currently quite favorable. The U.S. economy is benefiting from Trump administration’s business-friendly approach, including tax cuts and higher government spending. This has improved the employment scenario and aided manufacturing and non-manufacturing activities.

The Zacks Business Services sector has performed admirably so far this earnings season. According to the latest Earnings Preview, results from 22.6% of the sector’s total market capitalization in the S&P 500 Index, are out as of Oct 24. The sector’s earnings increased 11.5% year over year on 5.7% higher revenues, with 100% beating EPS estimates and 72.7% beating revenue estimates.

Per the above report, investors have reacted favorably to the strong earnings performance by most of the sector participants so far.  Key players like Omnicom Group Inc. OMC, The Interpublic Group of Companies, Inc. IPG, IQVIA Holdings Inc. IQV and Robert Half International Inc. RHI reported better-than-expected results in the third quarter.

Notably, the sector is expected to record double-digit earnings growth this quarter, with earnings on track to rise 11.4% year over year in third-quarter 2018 on the back of 3.6% rise in revenues.

The buoyancy in the sector is further confirmed by its Zacks Sector Rank in the top 50% (8 out of 16 sectors). Additionally, we observe that the sector has performed well in the past year compared with the benchmark. It has gained 7.5%, outperforming the 3.5% rise of the Zacks S&P 500 Composite Index.

 

Key Releases on Oct 31

Given this forecast, investors interested in business services stocks can watch out for three companies that are scheduled to report their respective quarterly numbers on Oct 31.

According to the Zacks model, a company needs the right combination of two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better — to increase the odds of an earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

We do not recommend Zacks Rank #4 (Sell) or 5 (Strong Sell) stocks going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Automatic Data Processing, Inc. ADP — a provider of business process outsourcing services — is scheduled to report first-quarter fiscal 2019 results, before market open.

The Zacks Consensus Estimate for first-quarter fiscal 2019 revenues stands at $3.28 billion, indicating year-over-year growth of 6.7%. The top line is expected to benefit from acquisitions, favorable foreign currency movements and strength across PEO Services segment.

The consensus estimate for earnings per share is pegged at $1.10, indicating year-over-year growth of 20.9%. Lower effective tax rate (as a result of Tax Cuts and Jobs Act), which reduced corporate tax rates significantly, is likely to boost ADP’s bottom line.

ADP has an impressive earnings surprise history, having surpassed estimates in each of the trailing four quarters, with an average positive surprise of 6.5%.

The company’s Zacks Rank #3 and an Earnings ESP of +1.54% makes us reasonably confident of an earnings beat. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

However, when we issued our earnings preview article, the company had an Earnings ESP of +2.73% and a Zacks Rank #4.

Automatic Data Processing, Inc. Price and EPS Surprise

 

Automatic Data Processing, Inc. Price and EPS Surprise | Automatic Data Processing, Inc. Quote

Aptiv PLC APTV designs and manufacturers vehicle components and provides electrical, electronic, and safety technology solutions to the automotive and commercial vehicle markets worldwide. The company is set to report third-quarter 2018 results, before the bell.

The Zacks Consensus Estimate for third-quarter revenues is pegged at $3.42 billion, indicating year-over-year decrease of 21%. Notably, the consensus estimate is almost in line with the lower end of the company guided range of $3.425-$3.525 billion.

The consensus mark for earnings is pegged at $1.20 per share, indicating year-over-year decrease of 27.7%. Notably, the consensus estimate is below the company guided EPS range of $1.21-$1.26.

Aptiv’s third-quarter results are expected to be hurt by seasonality. The company’s North American customers cut production in July. European customers reduce production in July and August. The shutdown periods in other parts of the world vary country-wise. Furthermore, overall automotive production remains low in July, August and September due to launch of component production for new vehicle models.

Aptiv has an attractive earnings surprise history, having surpassed estimates in three of the trailing four quarters, with an average positive surprise of 3.1%.

The company has a Zacks Rank #3 and an Earnings ESP of -2.36%, a combination which makes surprise prediction difficult. (Read more:  Aptiv to Report Q3 Earnings: What's in the Offing?)

Aptiv PLC Price and EPS Surprise

 

Aptiv PLC Price and EPS Surprise | Aptiv PLC Quote

Fiserv, Inc. FISV — a provider of financial services technology worldwide — is slated to release third-quarter 2018 results, after market close.

The Zacks Consensus Estimate for third-quarter revenues is pegged at $1.43 billion, indicating a 2.2% improvement from the year-ago quarter’s figure. The top line is expected to be driven by strength in card, biller and core account processing businesses.

The consensus estimate for earnings is pegged at 77 cents per share, indicating year-over-year growth of 20.3%. Higher revenues, lower taxes and disciplined capital allocation will benefit Fiserv’s earnings.

Fiserv has an impressive earnings surprise history, having surpassed estimates in three of the trailing four quarters, with an average positive surprise of 1.5%.

The company carries a Zacks Rank #3 and has an Earnings ESP of -3.78%. (Read more: Fiserv to Report Q3 Earnings: What's in the Cards?)

Fiserv, Inc. Price and EPS Surprise

 

Fiserv, Inc. Price and EPS Surprise | Fiserv, Inc. Quote

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Interpublic Group of Companies, Inc. (The) (IPG): Free Stock Analysis Report
 
Omnicom Group Inc. (OMC): Free Stock Analysis Report
 
Robert Half International Inc. (RHI): Free Stock Analysis Report
 
Automatic Data Processing, Inc. (ADP): Free Stock Analysis Report
 
Fiserv, Inc. (FISV): Free Stock Analysis Report
 
Aptiv PLC (APTV): Free Stock Analysis Report
 
IQVIA Holdings Inc. (IQV): Free Stock Analysis Report
 
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