Business Services Stocks Earnings On Apr 24: TSS, XRX, RHI

The first earnings season of the year is underway, with results from 87 S&P 500 members already out. Per the latest Earnings Preview, total earnings for these companies are up 25% from the same period last year on 10.7% higher revenues, with 82.8% beating earnings per share (EPS) estimates and 67.8% beating revenue estimates. The proportion of companies beating both EPS and revenue estimates is 62.1%.

More than 35% S&P 500 members are yet to report results this week. Total first-quarter earnings are expected to be up 18.3% from the prior-year quarter on 7% higher revenues.

Business Services Sector in Q1

The Business Services sector is one of the 11 Zacks sectors (out of total 16 Zacks sectors) expected to register double-digit earnings growth. Total earnings for the sector are expected to be up 11.4% on 4.6% higher revenues in first-quarter 2018.

Notably, Trump administration’s business-friendly approach, reduced tax rates, a strong U.S. economy, robust manufacturing activity and improvements in the labor market are currently major positives for the sector.

A glimpse of the sector's price trend reveals that it has returned 16% over the past year, outperforming the S&P 500's gain of 12.9%.

Key Upcoming Releases in the Space

Investors interested in the business services stocks can watch out for three companies that are expected to report their first-quarter 2018 numbers on Apr 24.

Based in Columbus, GA, Total System Services, Inc. (NYSE:TSS) provides electronic payment processing, merchant services and related services to financial and non-financial institutions in the United States and internationally. The stock has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for revenues in the to-be-reported quarter stands at $907.1 million, reflecting year-over-year decline of 23.4%. The estimate for earnings per share is pegged at 99 cents, indicating year-over-year growth of 20.7%.

We expect the adoption of accounting standards ASC 606 to reduce the company’s total revenues, primarily as a result of gross versus net presentation of interchange and payment network fees. However, Benefits from lower tax rates are likely to boost the company’s earnings. (Read more: Will Total System Earnings Gain From Higher Revenues?).

The company boasts an attractive earnings surprise history, having surpassed estimates in each of the trailing four quarters, with an average positive surprise of 6.6%. Additionally, the company has an Earnings ESP of +1.01%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Headquartered in Norwalk, CT, Xerox Corporation (NYSE:XRX) is a leader in the development, manufacture, marketing, servicing and financing of document equipment across the world.

The Zacks Consensus Estimate for revenues in the to-be-reported quarter stands at $2.4 billion, reflecting year-over-year decline of 2.8%. The estimate for earnings per share is pegged at 70 cents, indicating year-over-year growth of 16.7%.

While we expect decreasing demand for paper-related systems and unfavorable foreign currency movements to weigh on Xerox’s top-line growth, the bottom line is anticipated to be driven by encouraging performance of new products and strategic business investments. The company carries a Zacks Rank #3. (Read more: Xerox to Report Q1 Earnings: What's in the Cards?).

Xerox 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 5.2%. The company has an Earnings ESP of 0.00%.

Robert Half International Inc. (NYSE:RHI) is one of the nation’s leading employment service providers, headquartered in Menlo Park, CA. The company carries a Zacks Rank #3.

The Zacks Consensus Estimate for revenues and earnings is pegged at $1.4 billion and 73 cents per share, indicating year-over-year growth of 5.5% and 17.7%, respectively. Top-line growth is expected on the back of rising demand for professional staffing services and heavy investments in the technology staffing area. Benefits from lower tax rates and strategic investments in digital technology to enhance client services in the United States and internationally should boost the bottom line. (Read more: Robert Half International Q1 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 1.8%. The stock currently has an Earnings ESP of 0.00%.

What Does the Zacks Model Predict?

Notably, a positive Earnings ESP along with a Zacks Rank #3, makes us confident of an earnings beat for Total System Services in the to-be-reported quarter.

However, our proven model does not conclusively show that Xerox and Robert Half are likely to beat on earnings in the to-be-reported quarter. This is because a combination of Zacks Rank #3 and 0.00% Earnings ESP makes surprise prediction difficult.

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.

Other Releases

Investors interested in the same space are keenly awaiting first-quarter earnings reports from key players like FTI Consulting (NYSE:FCN) , S&P Global (NYSE:SPGI) and Interpublic Group of Companies (NYSE:IPG) . While FTI Consulting and S&P Global are slated to report quarterly numbers on Apr 26, Interpublic Group of Companies will release its results on Apr 27.

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