Business Service Stocks' Q4 Earnings on Jan 31: XRX, MAN, MA
Zacks Equity Research
Updated
As we delve deeper into the fourth quarter earnings, the overall picture looks on track to attain its best performance in eight quarters with better-than-expected results from most companies. We are now looking forward to seeing more sectors coming out with positives surprises.
Per the latest Earnings Preview, 170 S&P 500 companies have reported earnings till Jan 27, accounting for 33.9% of the index’s total market capitalization, with 64.1% topping EPS (earnings per share) estimates and 54.7% coming in ahead of top-line expectations.
With 330 index members yet to report their numbers, earnings from all the S&P 500 companies combined are expected to rise by 5.2% from the year-ago period on revenue growth of 4.0%.
Five out of 16 Zacks sectors are expected to witness a decline in earnings in the quarter, with Conglomerates, Autos and Transportation being the biggest drag.
The Business Services sector is looking reasonably good. For the sector, earnings are expected to grow 5.4%, while sales are likely to rise 8% from the last year. The projected improvement is majorly driven by the growing momentum in the economy as a whole and the job market in particular during the quarter.
Let’s have a sneak peek at three major Business Services stocks set to release their fourth-quarter 2016 results tomorrow.
Xerox Corporation XRX is scheduled to report results before the opening bell. In the last reported quarter, the company’s adjusted earnings matched the Zacks Consensus Estimate. Over the trailing four quarters, the company delivered a positive average earnings surprise of 6.5%, beating estimates twice.
Advancements in IT have resulted in the replacement of the traditional means of sending and storing information with the digital media. As a result, Xerox is grappling with decreased demand for paper-related systems and products, while its attempts to leverage the business process outsourcing market failed to lend growth momentum. Significant slip-ups in its Medicare and Medicare information services for several government agencies across the U.S. have also hurt its overall profitability.
Our proven model does not conclusively show that Xerox is likely to beat earnings this quarter as it does not possess the key components. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. You can see the complete list of today’s Zacks #1 Rank stocks here.
Earnings ESP is currently pegged at -10.7%, while the company has a Zacks Rank #5 (Strong Sell), making us uncertain of earnings beat (read more: Xerox Q4 Earnings: Is the Stock Likely to Disappoint?).
Xerox Corporation Price and EPS Surprise
Xerox Corporation Price and EPS Surprise | Xerox Corporation Quote
ManpowerGroup Inc. MAN is slated to report results before the opening bell.
Founded in 1948 and headquartered in Milwaukee, WI, ManpowerGroup is the global leader in the employment services industry and has a well-established network of 2,900 offices in 80 countries. The company is continuously making significant investments to expand permanent recruitment solutions offerings to capitalize on the future revenue-generating opportunities. A disciplined pricing policy and stringent cost-cutting efforts are likely to improve its bottom line in the future.
The company currently has an Earnings ESP of +1.18%, while it carries a Zacks Rank #3, making us confident of an earnings beat this quarter. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter
ManpowerGroup Price and EPS Surprise
ManpowerGroup Price and EPS Surprise | ManpowerGroup Quote
We expect Mastercard Incorporated MA to beat earnings expectations when it reports its fourth-quarter and full-year 2016 results before the opening bell.
MasterCard’s quarterly results should get support from the broader favorable macro trends in the U.S. economy, with improving consumer confidence and declining unemployment. Also, several markets across Europe have been showing signs of gradual recovery. Notably, due to weak British pound, inbound travels to the U.K. have been rising.
While the picture in Asia remains mixed, results will likely continue to benefit from growth momentum in India. Notably, on Nov 8, 2016, the Indian government declared the two largest denomination bills invalid, thereby withdrawing around 86% of circulating cash by value. The move encourages digital transactions in India. Payment processing giant – MasterCard – should gain from substantial rise in transactions in the quarter.
The company currently has an Earnings ESP of +3.53%, while it carries a Zacks Rank #3, making us confident of an earnings beat this quarter (read more: Why MasterCard May Beat on Earnings in Q4?).
Mastercard Incorporated Price and EPS Surprise
Mastercard Incorporated Price and EPS Surprise | Mastercard Incorporated Quote
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