Buy 5 Business Services Sector Stocks to Boost Your Portfolio Stability

The U.S. Business Services Sector has been well supported by the strong fundamentals of the domestic economy. The space consists of companies providing business services such as, consulting, staffing, financial tractions, outsourcing, advertising, waste removal, building maintenance, technology services and auction/valuation services.

Having evolved into a mature and resilient ecosystem, the sector continues to experience consistent demand for its services. Revenues, income, and cash flows are now above the pre-pandemic levels. The rapid advancement and adoption of artificial intelligence and automation technologies are reshaping how business services are delivered.

The Zacks-defined Business Services Sector is currently in the top 38% of the Zacks Sector Rank. Since the business services sector is ranked in the top half of the Zacks Ranked sectors, we expect it to outperform the market over the next three to six months.

Here we recommend five business services stocks with a favorable Zacks Rank to stabilize your portfolio returns. These are: Xylem Inc. XYL, Thomson Reuters Corp. TRI, UL Solutions Inc. ULS, Omnicom Group Inc. OMC and Veralto Corp. VLTO. Each of our picks currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Xylem Inc.

Xylem sees steady demand given the essential nature of its offerings, irrespective of economic cycles. XYL’s M&CS unit is benefiting from robust demand for smart metering and other applications, primarily in the United States. Growth in XYL’s transport and treatment application businesses is boosting the Water Infrastructure unit’s performance. 

Strength in capital projects and services across the utility and power markets is a boon for the Water Solutions segment. Acquired assets are another positive factor driving XYL’s top line. XYL’s commitment to rewarding shareholders adds to the stock’s appeal.

Xylem has an expected revenue and earnings growth rate of 3.7% and 9.6%, respectively, for next year. The Zacks Consensus Estimate for next year’s earnings has improved 2.8% in the last 30 days.

Thomson Reuters Corp.

Thomson Reuters is a leading provider of value-added information and technology to users in the fields of law, tax, accounting, financial services, higher education, reference information, corporate training and assessment, scientific research and healthcare. TRI has five segments: Legal Professionals, Corporates, Tax and Accounting Professionals, Reuters News, and Global Print. TRI operates in the Americas, Europe, the Middle East, Africa, and the Asia Pacific.

Thomson Reuters has an expected revenue and earnings growth rate of 7.8% and 14.2%, respectively, for next year. The Zacks Consensus Estimate for next year’s earnings has improved 1.4% in the last seven days.

UL Solutions Inc.

UL Solutions provides safety science services. ULS’ operating segment includes Industrial, Consumer, and Software and Advisory. ULS’ Industrial segment provides testing, inspection, and certification services. Its Consumer segment offers safety certification testing, ongoing certification, global market access, testing for connectivity, performance and quality, and critical systems advisory and training services. ULS’ Software and Advisory segment provide software and technical advisory services.

UL Solutions has an expected revenue and earnings growth rate of 5.4% and 6.5%, respectively, for next year. The Zacks Consensus Estimate for next year’s earnings has improved 4.6% in the last seven days.

Omnicom Group Inc.

Omnicom Group’s diverse portfolio across domains and in both the traditional and digital marketing segments reduces reliance on single revenue streams, ensuring adaptability and stability of revenues. 

OMC’s investments in IT, data, analytics, and precision marketing enhance operational efficiency and attract clients with personalized campaigns, supporting growth in the digital advertising space. These efforts of OMC are supplemented with strategic M&A and reorganization efforts that bolster profitability. OMC continues to return value to shareholders through both repurchases and dividends.

Omnicom Group has an expected revenue and earnings growth rate of 3.2% and 6.9%, respectively, for next year. The Zacks Consensus Estimate for next year’s earnings has improved 0.1% in the last 30 days.

Veralto Corp.

Veralto’s leadership in Water Quality and Product Quality segments positions it for growth through U.S. infrastructure investments and rising semiconductor demand. TraceGains enhances VLTO’s offerings in digital solutions for the food and beverage industry. 

In the municipal vertical, increased U.S. government funding to address VLTO’s water infrastructure challenges offers a strong growth catalyst. This support is expected to boost investments in upgrading and modernizing water systems, further driving demand for VLTO’s solutions.

VLTO has established itself as a trusted leader in the Product Quality and Inspection (PQI) segment, serving the major consumer-packaged goods (CPG), life sciences, and pharmaceutical companies. The Marketing & Coding sub-segment is the largest contributor to PQI’s revenue, reflecting its critical role in driving industry growth. M&C has become indispensable for CPG and pharmaceutical companies in a digital-first world.

Veralto has an expected revenue and earnings growth rate of 5.8% and 9.3%, respectively, for next year. The Zacks Consensus Estimate for next year’s earnings has improved 0.5% in the last seven days.

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This article originally published on Zacks Investment Research (zacks.com).

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