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Business Services Stocks' Q3 Earnings on Nov 1: IT, SRCL, WU

The business services sector covers a wide array of services including marketing and advertising, consulting, outsourcing, staffing, technology, government, business-information and waste management. 

The sector’s performance is a function of the health of the broader economy which is currently on a solid footing buoyed by a strong labor market, unemployment at a 49-year low, rising wages and modest inflation.

Notably, U.S. GDP grew 3.5% in the third quarter of 2018, per the advance estimate released by the Bureau of Economic Analysis on Oct 26. A better picture will be available when the second estimate is released in November.  U.S. GDP grew 4.1% in the second quarter, almost doubling from 2.2% increase witnessed in the first quarter and recording the strongest performance in four years.

Post the tax reform, U.S. companies are pouring tax savings into growth initiatives. This is aiding both manufacturing and non-manufacturing activities, thereby spurring demand for business services.

The Zacks Business Services sector has performed impressively so far this earnings season with key players like Omnicom Group Inc. OMC, The Interpublic Group of Companies, Inc. IPG, IQVIA Holdings Inc. IQV and Robert Half International Inc. RHI reporting better-than-expected third-quarter results.

The sector currently carries a Zacks Sector Rank in the top 50% (8 out of 16 sectors) and has gained 7.7% over the past year, outperforming the 3.4% rise of the Zacks S&P 500 composite.

 

Key Releases on Nov 1

Given this backdrop, investors interested in business services stocks can watch out for three companies that are scheduled to report their third-quarter 2018 numbers on Nov 1.

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.

Based in Connecticut, Gartner, Inc. IT operates as a research and advisory company.

The Zacks Consensus Estimate for third-quarter revenues is pegged at $919.79 million, indicating year-over-year growth of 11.1%. The upside is likely to be driven by strong performance in the Research, Consulting and Events segments. Notably, the company expects to deliver strong top-line performance in the to-be-reported quarter on the back of strengthening U.S. dollar during the course of the second quarter.

The consensus estimate for earnings is pegged at 62 cents per share, indicating year-over-year decline of 4.6%. Seasonality is expected to have a higher negative impact in the to-be-reported quarter than the year-ago quarter. Post the acquisition of CEB, the company generates the majority of profits in the second and fourth quarters, while the same declines during the first and third quarters. (Read more: Gartner to Report Q3 Earnings: Is a Beat in Store?)

Gartner has an impressive earnings surprise history, having surpassed estimates in three of the trailing four quarters, with an average positive surprise of 11.7%.

The company’s Zacks Rank #3 and an Earnings ESP of +1.07% makes us reasonably confident of an earnings beat. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Gartner, Inc. Price and EPS Surprise

 

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

Based in Illinois, Stericycle, Inc. SRCL provides regulated and compliance solutions to the healthcare, retail, and commercial businesses in the United States and internationally.

The Zacks Consensus Estimate for third-quarter revenues is pegged at $858.94 million, indicating year-over-year decrease of 2.7%. Decline in revenues from the majority of its services is likely to dent the company’s top line in the to-be-reported quarter.

The consensus mark for earnings is pegged at $1.01 per share, indicating year-over-year decrease of 8.2%. Stericycle has a decent earnings surprise history, having surpassed estimates in two of the trailing four quarters, with an average positive surprise of 1.2%.

Currently, the company has a Zacks Rank #4 and an Earnings ESP of +2.52. (Read more: How Will Stericycle's Top Line Shape Up in Q3 Earnings?)

Stericycle, Inc. Price and EPS Surprise

 

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

Based in Colorado, The Western Union Company WU provides money movement and payment services worldwide.

The Zacks Consensus Estimate for third-quarter revenues is pegged at $1.42 billion, indicating year-over-year growth of 1%. The top line is likely to gain from strength across the company’s global consumer money transfer business and growth in digital money transfer revenues through westernunion.com. The company should also benefit from its expanding retail presence and addition of large agents such as Albertsons grocery chain to its network. Strength across Consumer-to-Consumer (C2C) segment is likely to partially offset the loss in Business Solutions segment.

The consensus estimate for earnings is pegged at 48 cents per share, indicating year-over-year decrease of 9.4%.The bottom line is expected to be hurt by lower adjusted operating profit margin and higher adjusted tax rate.

Western Union has a decent earnings surprise history, having surpassed estimates in two of the trailing four quarters, with an average positive surprise of 4.7%.

The company carries a Zacks Rank #4 and an Earnings ESP of 0.00%. (Read more: Western Union Q3 Earnings: What's in the Cards?)

The Western Union Company Price and EPS Surprise

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Gartner, Inc. (IT): Free Stock Analysis Report
 
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
 
Stericycle, Inc. (SRCL): Free Stock Analysis Report
 
The Western Union Company (WU): Free Stock Analysis Report
 
IQVIA Holdings Inc. (IQV): Free Stock Analysis Report
 
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