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Analysts At BMO Capital Give Investors Their Picks In 4 Sectors

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Analysts At BMO Capital Give Investors Their Picks In 4 Sectors

Analysts at BMO Capital Markets revealed their top picks in the four sectors — information services, payroll processing, tax preparers and staffing — ahead of the second-quarter earnings season.

Info Services

BMO said IHS Inc. (NYSE: IHS) earnings could be better-than-expected, as "the Energy sector is stabilizing and the Auto sector is still solid."

"In the credit ratings space, indicators show credit issuance volumes stabilizing in 2Q16 — we believe Moody's Corporation (NYSE: MCO) and S&P Global Inc (NYSE: SPGI) earnings could be better than expected; we continue to prefer SPGI for the expected margin expansion from the SNL acquisition," analyst Jeffrey Silber wrote in a note.

Related Link: BMO Predicts Improvement In Credit Trends, Recommends 7 Stocks

In addition, Silber sees Verisk Analytics, Inc. (NASDAQ: VRSK) as benefiting from margin gains from its insurance business. The analyst expects the company to "provide more color on the use of proceeds from the completed Verisk Health sale, which could be a catalyst for the stock."

Further, Silber expects Press Ganey Holdings Inc (NYSE: PGND) to continue to outperform due to strong end-market demand as hospitals transition toward more transparent patient reporting.

Payroll Processors

The analyst noted that the payroll providers are at risk from slowing employment growth and the passing of demand related to ACA compliance HCM (Human Capital Management) products.

Silber added that the HCM business of both Automatic Data Processing (NASDAQ: ADP) and Paychex, Inc. (NASDAQ: PAYX) could benefit from labor market regulation. However, the analyst said there is intense competition, especially in the low-mid market.

"Given current valuations, we prefer ADP to PAYX as we believe ADP's retention issues should be largely resolved and its market position (with larger enterprises) is better insulated from aggressive competition," Silber continued.

Tax Preparers

Silber said although H & R Block Inc (NYSE: HRB) is favored among the value-oriented investors, the company faces tough secular trends. Next potential catalyst is the expected restructuring plan to be announced at the Investor Day in December.

Staffing

BMO said Indicators show the U.S. staffing sector stabilizing (though still weak) in the second quarter, with the commercial sector (clerical, light industrial) still sluggish.

However, trends are still strong in healthcare and IT staffing, and this bodes well for AMN Healthcare Services, Inc. (NYSE: AHS) and On Assignment, Inc. (NYSE: ASGN). In addition, ManpowerGroup Inc. (NYSE: MAN) should benefit strong European commercial staffing trends.

"We caution that trading in the sector could be volatile as the macro environment becomes more uncertain," Silber added.

Latest Ratings for ADP

DateFirmActionFromTo
Sep 2019DowngradesBuyNeutral
Aug 2019MaintainsEqual-Weight
Aug 2019MaintainsOverweight

View More Analyst Ratings for ADP
View the Latest Analyst Ratings

Posted-In: Jeffrey SilberAnalyst Color Long Ideas Analyst Ratings Trading Ideas

 

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