Per the latest report from Institute of Supply Management (ISM), service activity in the United States grew for the 99th consecutive month, indicating flourishing non-manufacturing activity.
Despite maintaining its growth for a long streak, the metric actually came in lower than expected for the month of April. This decline is rather a seasonal fluctuation, with the majority of the surveyed industries stating that trade-war related tensions and Trump’s tariff polices actually weighed on service activity in the United States.
However, the fact that the metric has expanded for close to a hundred months and all of the 18 non-manufacturing industries have reported growth, makes investing in business service stocks a prudent decision.
Despite Dip, Service Activity Still Booming
The Institute of Supply Management reported on May 3 that non-manufacturing activity for April came in at 56.8%, lower than the consensus estimate of 58.1% and last month’s figure of 58.8%. A reading above 50 indicates expansion in the sector.
However, the decline should be brushed aside as momentary owing to trade-war worries that have made suppliers across the globe nervous. With Trump’s decision to postpone the imposition of import tariffs on steel purchases, such tensions have somewhat subsided. Further, all of the 18 industries which the metric tracks, actually reported growth in the last month.
Business Activity, New Orders Surge
Further, Prices Index advanced by 0.3 percentage points to 61.8%, representing an increase in prices in April for the 26th month on the trot. Moreover, the ISM Business Activity Index registered growth of 59.1% in April to report growth in business activity for the 105th consecutive month. Notably, all of the 15 industries reported an increase in business activity for April.
Looking at other positive developments from the report, the non-manufacturing New Orders Index surged to 60% in the month. This represents an advancement for 87 straight months that too at an accelerated rate when compared with March. Finally, the non-manufacturing Employment Index surged to 53.6%, expanding for the 50th month on the trot.
4 Top Picks
Despite the decline in April, service activity in the United States expanded for 99 straight months. This represents a burgeoning service sector in the country. Further, the fact that all of the 18 sectors have reported growth in the period underlines the fact that betting on business service stocks would provide investors with handsome returns.
In this context, we have selected four stocks that are expected to gain from these factors. These five stocks flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
CRA International, Inc. CRAI provides financial and business consulting services.
The company is based out of Boston and sports a Zacks Rank #1. The expected earnings growth rate for the current year is 20.42%. The Zacks Consensus Estimate for the current year has improved 7% over the past 60 days.
NV5 Global, Inc. NVEE is a provider of technical consulting and certification services.
The company is based out of Hollywood and sports a Zacks Rank #1. The expected earnings growth rate for the current year is 28.99%. The Zacks Consensus Estimate for the current year has improved 12.9% over the past 60 days.
SP Plus Corporation SP provides professional parking, ground transportation, facility maintenance, security and event logistics services to property owners and managers in every market of the real estate industry.
The company is based out of Chicago and carries a Zacks Rank #2. The expected earnings growth rate for the current year is 30%. The Zacks Consensus Estimate for the current year has improved 10.5% over the past 60 days.
DXC Technology Company DXC is an IT services company.
The company is based out of Tysons and has a Zacks Rank #2. The expected earnings growth rate for the current year is 14.95%. The Zacks Consensus Estimate for the current year has improved 0.4% over the past 60 days.
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