Business Services Q2 Earnings on Aug 2: GPN, WEX, FLT, WU

We are in the thick of the second-quarter earnings season, with 265 S&P 500 companies (collectively accounting for 66.2% of the index’s total market capitalization) having already reported their quarterly numbers as of Jul 27. Per the latest Earnings Preview, total earnings of these 265 companies increased 23.6% from the same period last year on 10.1% higher revenues, with 80.8% beating EPS estimates and 72.1% beating revenue estimates.

We will get a clearer picture by the end of the current week, which will see 960 companies reporting their quarterly results, including 139 players in the S&P 500 space.

Per the above report, the bottom and the top lines (in the S&P 500 Index) are likely to improve 23.6% and 8.8%, respectively at the end of the current reporting cycle. In fact, of the 16 Zacks sectors, 12 are anticipated to end the second-quarter reporting cycle with double-digit earnings growth. One of them is the Zacks Business Services sector. On a year-over-year basis, earnings and revenues from this sector are anticipated to increase 6.4% and 22.1%, respectively.

The outlook for the business services sector is highly dependent on the health of the broader economy, which is currently quite favorable. The U.S. economy is benefiting from Trump administration’s business-friendly approach, including tax cuts, higher spending and repeal of regulations. This has improved the employment scenario and aided manufacturing and non-manufacturing activities.

The business services sector has also performed well compared with the benchmark index year to date. The sector has gained 9.3%, which compares favorably with the Zacks S&P 500 Composite’s rally of 5.1% in the said time frame.

Key Releases on Aug 2

Given this bullish backdrop, investors interested in the business services stocks can watch out for four companies that are scheduled to report their second-quarter 2018 numbers on Aug 2.

According to the Zacks model, a company needs the right combination of two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better — to increase the odds of an earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Meanwhile, we do not recommend Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially if they have a negative Earnings ESP.

Based in Georgia, Global Payments Inc. GPN is a leading worldwide provider of payment technology and software solutions.

The Zacks Consensus Estimate for adjusted revenues is pegged at $967.9 million, indicating year-over-year growth of 14.2%. Solid revenue growth across United States, Europe and Asia Pacific should boost the top line. Moreover, the ever-increasing demand for electronic payment transactions provides abundant scope for top-line growth. Accretion from the merger with Heartland Payments, other alliances and joint ventures is likely to act as another driving factor. (Read more: Global Payments Q2 Earnings: What's in the Cards?)

The consensus mark for adjusted earnings is pegged at $1.22 per share, indicating year-over-year growth of 29.8%. Lower tax rates (as a result of Tax Cuts and Jobs Act, which reduced corporate tax rates significantly from 35% to 21%) are likely to boost earnings.

Global Payments has an impressive earnings surprise history, having surpassed estimates in each of the trailing four quarters, with an average positive surprise of 3.4%.

However, the company has a Zacks Rank #4 and an Earnings ESP of -0.68%.

Based in Maine, WEX Inc. WEX provides physical, digital and virtual corporate card payment solutions.

The Zacks Consensus Estimate for revenues and adjusted earnings is pegged at $366 million and $2.04 per share, indicating year-over-year growth of 20.5% and 61.9%, respectively. Solid growth across all business segments, organic growth, strategic investments in technology and acquisitions, increased market share, addition of new businesses and contract renewals with long-time partners, and high customer retention rates are likely to boost overall growth.

Notably, the consensus estimate falls within the company’s guided revenue range of $357-$367 million and earnings range of $1.96-$2.06 per share for the second quarter.

WEX has an impressive earnings surprise history, having surpassed estimates in each of the trailing four quarters, with an average positive surprise of 2.6%.

The company’s Zacks Rank #2 (Buy) and an Earnings ESP of +0.16% makes us reasonably confident of an earnings beat. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Based in Georgia, FLEETCOR Technologies, Inc. FLT is a global provider of fuel cards, commercial payment and data solutions and workforce payment products and services.

The Zacks Consensus Estimate for adjusted revenues and earnings is pegged at $595.8 million and $2.52 per share, indicating year-over-year growth of 10.1% and 26.6%, respectively. We believe favorable impact of acquisitions, organic growth, higher fuel prices and fuel spread margins (primarily in the U.S.), lower tax rate, foreign exchange movements and macroeconomic environment are likely to boost overall growth. Solid growth across its geographic presence (both North America and International) and the majority of its product categoriesis likely to drive its performance.

FLEETCOR expects its second-quarter earnings to be almost similar with that of the first quarter. Revenue and operating performance is expected to improve from the first quarter.

FLEETCOR boasts an attractive earnings surprise history, having surpassed estimates in each of the trailing four quarters, with an average positive surprise of 2.9%.

The company has a Zacks Rank #4 and an Earnings ESP of -0.45%.

Based in Colorado, The Western Union Company WU is a global leader in cross-border, cross-currency money movement.

The Zacks Consensus Estimate for revenues is pegged at $1.44 billion, indicating year-over-year growth of 4.2%. The top line is likely to benefit from solid growth in the consumer money transfer business, especially the digital payment version. Strength across segments should further boost the top line.

The consensus mark for adjusted earnings is pegged at 47 cents per share, indicating year-over-year decline of 6%. Western Union boasts an attractive earnings surprise history, having surpassed estimates in three of the trailing four quarters, with an average positive surprise of 9.9%.

However, the company has a Zacks Rank #4 and an Earnings ESP of -1.64%.

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