Business activity in the United States is growing at a healthy pace after struggling for months. The services sector saw solid growth in July. Despite supply constraints that have increased companies’ input costs, robust demand is lending support to the sector.
Given this situation, it makes for an ideal opportunity to invest in business services stocks such as Huron Consulting Group Inc. HURN, Coursera, Inc. COUR, Kforce Inc. KFRC and Korn Ferry KFY.
Business Activity Grows
The Institute for Supply Management (ISM) reported on Tuesday that impressive business services marked a solid start to the third quarter. The ISM’s nonmanufacturing purchasing managers index rose to 54.1 in July from a reading of 54 in the prior month.
Any reading above 50 suggests an expansion. The Services sector accounts for more than two-thirds of the economic activity in the United States.
The new orders index jumped to 57.2 in July from 55.1 in the month earlier. However, the supplier deliveries index fell to 52.8 in July from ‌54.4 in June. Thirteen industries reported growth.
The index tracking the prices businesses pay for inputs climbed to 70.3 in July from 67.7 in the prior month as prices of several things such as aluminum, copper, paper, computers and peripherals and software licenses increased. Despite the supply constraints and higher input costs, a rise in new orders suggests robust domestic demand for services.
Also, new orders were boosted by a rise in exports. Inflation rose in the second quarter, posing a major challenge for the services sector. However, oil prices have eased substantially over the past month, and with signs of the Middle East conflict nearing an end, input costs could decline. This is likely to ease inflation further and boost the sector.
4 Business Services Stocks With Growth Potential
Huron Consulting Group
Huron Consulting Group Inc. is the parent company of Huron Consulting Services LLC, an independent provider of financial and operational consulting services. HURN’s experienced and credentialed professionals employ their expertise in accounting, finance, economics and operations to a wide variety of both financially sound and distressed organizations, including Fortune 500 companies, medium-sized businesses, leading academic institutions, healthcare organizations and the law firms that represent these various organizations.
Huron Consulting Group’s expected earnings growth rate for the current year is 17.2%. The Zacks Consensus Estimate for current-year earnings has improved 5.4% over the past 60 days. HURN presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Coursera
Coursera, Inc. is an online learning platform. COUR partners with university and industry partners to offer a broad catalog of content and credentials, including Guided Projects, courses, Specializations, certificates and bachelor's and master's degrees.
Coursera’s expected earnings growth rate for the current year is 59%. The Zacks Consensus Estimate for current-year earnings has improved 51.2% over the past 60 days. COUR presently sports a Zacks Rank #1.
Kforce
Kforce Inc. and its subsidiaries provide professional staffing services and solutions to clients on both a temporary and permanent basis through its Technology and Finance and Accounting segments.
Kforce’s expected earnings growth rate for the current year is 23%. The Zacks Consensus Estimate for current-year earnings has improved 2% over the past 60 days. KFRC presently carries a Zacks Rank #2 (Buy).
Korn Ferry
Korn Ferry is the world's leading and largest executive recruitment firm with the broadest global presence in the executive recruitment industry. KFY provides executive recruitment services exclusively on a retained basis and serves the global recruitment needs of its clients from middle to executive management.
Korn Ferry’s expected earnings growth rate for the current year is 8.9%. The Zacks Consensus Estimate for current-year earnings has improved 0.9% over the past 60 days. KFY presently carries a Zacks Rank #2.
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