BMO said IHS Inc. 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 MCO and S&P Global Inc 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.
In addition, Silber sees Verisk Analytics, Inc. 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 PGND to continue to outperform due to strong end-market demand as hospitals transition toward more transparent patient reporting.
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 ADP and Paychex, Inc. 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.
Silber said although H & R Block Inc 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.
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. AHS and On Assignment, Inc. ASGN. In addition, ManpowerGroup Inc. 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.
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