Published on 23 Feb 2023 on Zacks via Yahoo Finance

3 Service Stocks Poised to Beat Earnings Estimates in Q4

Things were not rosy for the Business Services sector throughout the fourth quarter of 2022 due to macroeconomic headwinds such as the ongoing Russia-Ukraine war, high inflation and Federal Reserve’s aggressive stance on hiking the interest rate to curb inflation. Widespread supply-chain disruptions and labor market constraints were major overhangs for service stocks. The fear of an economic slowdown affected consumer spending.

The sector is a major beneficiary of manufacturing and service activities, and both have seen a contraction phase in the fourth quarter. In December, the manufacturing sector contracted for the second consecutive month after 29 months of expansion. The service sector contracted for the first time after a 30-month period of expansion.

Nevertheless, the sector has plenty of driving factors that one cannot ignore. The essentiality of certain services like waste management and pest control, the rise in demand for risk mitigation and consulting services, increased expertise in improving operational efficiency and reducing costs, successful work-from-home models, the growing adoption of cloud-based services, and digital transformation acted as tailwinds in the quarter.