The Business Services sector, which encompasses a range of industries such as consulting, outsourcing, staffing, and waste management, has been a major beneficiary of the improving economic health. As the economy continues to recover, the sector has experienced growth driven by factors like successful work-from-home models, digital transformation, and the increasing demand for essential services. In this article, we will take a closer look at three major players in the business services industry, Broadridge Financial Solutions, Aptiv PLC, and Palantir Technologies Inc., as they prepare to report their Q3 2023 earnings on November 2.
Q3 Tailwinds for Business Services
The third quarter of 2023 saw a significant boost in economic growth, with the GDP growing at an annual rate of 4.9%, compared to 2.1% in the second quarter. This growth has positively impacted the demand for business services, particularly in industries such as retail trade, mining, utilities, construction, health care, finance, insurance, information, education, professional, scientific, and transportation. The Services PMI, measured by the Institute for Supply Management, remained above 50% for nine consecutive months during the third quarter, indicating sustained growth in service activities.
Earnings Picture So Far and Expectations
So far, the third-quarter earnings for S&P 500 members in the business services sector have been impressive. According to the latest Earnings Outlook, these companies have seen year-over-year earnings growth of 11% on 4.7% revenue growth. The majority of these companies have also beaten EPS estimates and sales projections. The consensus estimate for the sector’s total quarterly earnings is expected to show a 7.6% year-on-year growth, with revenues projected to rise by 5.3%. This is an improvement compared to the second quarter, which saw 6.5% growth in earnings and 5.7% growth in revenues.
Broadridge Financial Solutions, Inc. (BR)
Broadridge Financial Solutions is a provider of investor communications and technology-driven solutions. The company is expected to report Q3 2023 earnings with an estimated revenue of $1.37 billion, indicating a year-over-year increase of 7.1%. The company’s Investor Communication Solutions (ICS) segment is projected to see a 10.4% increase in revenues compared to the previous year. The Zacks Consensus Estimate for quarterly earnings is $0.94 per share, representing a 11.9% increase from the same quarter last year.
Aptiv PLC (APTV)
Aptiv is involved in the design, manufacture, and sale of vehicle components globally. The company is expected to report revenue of $5 billion for Q3 2023, indicating a year-over-year growth of 8.2%. The Advanced Safety & User Experience segment is projected to see a 2.1% increase in revenues, while the Signal & Power Solutions segment is estimated to grow by 7.6%. The consensus estimate for earnings is $1.20 per share, a decline of 6.3% from the previous year due to increasing operating expenses.
Palantir Technologies Inc. (PLTR)
Palantir Technologies is a software platform developer that is anticipated to report revenue of $555 million for Q3 2023, reflecting a growth of 16.1% from the same period last year. The company’s revenues are expected to benefit from the strength in both the Government and Commercial segments. The consensus estimate for earnings is $0.06 per share, representing a growth of over 100% from the previous year due to revenue growth and improved operating performance.
Overall, the business services sector has shown strong growth in the third quarter, driven by a recovering economy and increasing demand for essential services. Broadridge Financial Solutions, Aptiv PLC, and Palantir Technologies Inc. are expected to deliver positive results in their upcoming earnings reports, reflecting the sector’s overall performance. Investors and traders should keep a close eye on these companies as they provide valuable insights into the state of the business services industry.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.