Business Services Q2 Earnings on Jul 24: IQV, TSS & More

The second-quarter earnings season has started on a solid note, with strong revenue momentum.

According to the latest Earnings Preview, 87 S&P 500 companies (who collectively account for 25.7% of the index’s total market capitalization) have already reported results. Per the report, second-quarter 2018 total earnings for these companies increased 20.9% from the same period last year on 10.3% higher revenues, with 86.2% of the companies beating EPS estimates and 77% beating revenue estimates.

More than 413 companies are yet to report results for the second quarter.

Bullish Q2 View

Per the above report, stocks in the Business Services sector are expected to record top-and bottom line growth of 5.4% and 15.6%, respectively. Notably, the sector is one of the 11 Zacks sectors (out of total 16 Zacks sectors) expected to register double-digit earnings growth. Total second-quarter 2018 earnings are expected to be up 21% on 8.3% higher revenues.

The outlook of the business services sector is highly dependent on the health of the broader economy, which is currently quite favorable. The overall U.S. economy is benefiting from Trump administration’s business-friendly approach, including tax cuts, higher spending and repeal of regulations. This has improved the employment scenario, and aided manufacturing and non-manufacturing activities.

Stocks to Watch Out For Earnings on Jul 24

Given this bullish backdrop, investors interested in the business services stocks can watch out for five companies that are scheduled to report their second-quarter 2018 numbers on Jul 24.

Based in North Carolina, IQVIA Holdings IQV is a provider of information, innovative technology solutions and contract research services. The company carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for revenues and earnings is pegged at $2.50 billion and $1.24 per share, indicating year-over-year growth of 27.2% and 13.8%, respectively. The top line is expected to be driven by operational upside, phasing of pass-through in the company’s R&D Solutions segment and FX data win. Strong operational performance in the quarter is expected to positively impact the company’s bottom line. (Read more: What's in the Cards for IQVIA Holdings in Q2 Earnings?)

IQVIA Holdings boasts an attractive earnings surprise history, having surpassed estimates in all the trailing four quarters, with an average positive surprise of 4.3%. Additionally, the company has an Earnings ESP of +0.25%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

IQVIA Holdings Inc. Price and EPS Surprise

 

IQVIA Holdings Inc. Price and EPS Surprise | IQVIA Holdings Inc. Quote

Based in Georgia, Total System Services TSS provides electronic payment processing, merchant services and related services to financial and non-financial institutions in the United States and internationally. The company has a Zacks Rank #3 (Hold).

The company’s total System’s Issuer Solutions segment should see top-line growth from an increase in Total Accounts on File (AoF), led by new business and internal growth. Focus on new product initiatives, technology modernization and integration activities will further aid revenues in the segment. The Zacks Consensus Estimate for total AoF is 826 million, reflecting an increase of 6.7% year over year. The company’s NetSpend segment should deliver revenue growth from an increase in gross dollar volume, higher debit active cards and contract extensions for several significant partnership agreements. The consensus estimate for total revenues from this segment is $189 million, up 3.3% year over year. Acquisition of Cayan Holdings and TransFirst should boost Merchant Solutions segment revenue. The consensus mark for revenues from this segment stands at $346 million, which translates into year-over-year growth of 24%.

The Zacks Consensus Estimate for earnings is pegged at $1.08 per share, reflecting year-over-year growth of 27.1%. Lower tax rate (as a result of Tax Cuts and Jobs Act) is likely to boost the bottom line. (Read more: Is a Beat in Store for Total System in Q2 Earnings?)

Total System Services has an impressive earnings surprise history. The company’s earnings surpassed the Zacks Consensus Estimate in all the previous four quarters, delivering an average beat of 8.5%. The company has an Earnings ESP of +1.81%.

Total System Services, Inc. Price and EPS Surprise

 

Total System Services, Inc. Price and EPS Surprise | Total System Services, Inc. Quote

Based in California, Robert Half International Inc. RHI is one of the largest human resource consulting firms in the United States. The company has a Zacks Rank #3.

The Zacks Consensus Estimate for revenues and earnings is pegged at $1.43 billion and 85 cents per share, indicating year-over-year growth of 9.1% and 32.8%, respectively. Strength across all the segments and lower U.S. tax rates are likely to boost Robert Half's second-quarter results. (Read more: Robert Half International Q2 Earnings: What's in Store?)

Robert Half has a decent earnings surprise history. The company’s earnings surpassed the Zacks Consensus Estimate in two of the previous four quarters, delivering an average beat of 2.4%. The company has an Earnings ESP of 0.00%.

Robert Half International Inc. Price and EPS Surprise

 

Robert Half International Inc. Price and EPS Surprise | Robert Half International Inc. Quote

Based in New York, The Interpublic Group of Companies IPG is one of the world's leading organizations of advertising agencies and marketing services companies. The company carries a Zacks Rank #3.

The Zacks Consensus Estimate for revenues and earnings is pegged at $1.92 billion and 43 cents per share, indicating year-over-year growth of 1.1% and 59.3%, respectively. Higher organic growth, positive foreign currency impact, lower tax rates and improving operating metrics are likely to drive Interpublic's second-quarter results. (Read more: Interpublic to Report Q2 Earnings: What's in Store?)

Interpublic has a disappointing earnings surprise history. The company’s earnings lagged the Zacks Consensus Estimate in three of the previous four quarters, resulting in an average negative surprise of 12.3%. The company has an Earnings ESP of 0.00%.

Interpublic Group of Companies, Inc. (The) Price and EPS Surprise

 

Interpublic Group of Companies, Inc. (The) Price and EPS Surprise | Interpublic Group of Companies, Inc. (The) Quote

Based in Ontario,Waste Connections WCN is an integrated solid waste services company. The company has a Zacks Rank #2.

The Zacks Consensus Estimate for revenues and earnings is pegged at $1.23 billion and 63 cents per share, indicating year-over-year growth of 4.3% and 14.6%, respectively. The top line is expected to do well on the back of strategic acquisitions and increase in prices charged to customers. Tax benefits, price-driven earnings growth in solid waste segments and volume-driven earnings growth in E&P segment are likely to boost the bottom line. (Read more: Waste Connections to Report Q2 Earnings: What's Up?)

Waste Connections has an impressive earnings surprise history. The company’s earnings surpassed the Zacks Consensus Estimate in three of the previous four quarters, delivering an average beat of 3.3%. The company has an Earnings ESP of 0.00%.

Waste Connections, Inc. Price and EPS Surprise

 

Waste Connections, Inc. Price and EPS Surprise | Waste Connections, Inc. Quote

What Does the Zacks Model Predict?

According to the Zacks model, a company with a Zacks Rank #1, 2 or 3 has a good chance of beating estimates if it also has a positive Earnings ESP. We also don’t recommend Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially if they have a negative Earnings ESP.

A positive Earnings ESP along with a Zacks Rank #2 or #3 makes us confident of an earnings beat for IQVIA Holdings and Total System Services in the to-be-reported quarter.

However, the combination of Waste Connections’ Zacks Rank #2 and 0.00% Earnings ESP makes surprise prediction difficult. 

Similarly, Robert Half and Interpublic’s 0.00% ESP and Zacks Rank #3 complicate our surprise prediction.

Irrespective of an earnings beat or miss, investors are likely to focus on the companies’ fundamentals to make investment decisions. Therefore, don’t forget to check our full write up on earnings releases of these stocks later.

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Interpublic Group of Companies, Inc. (The) (IPG) : Free Stock Analysis Report
 
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