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The third quarter of 2024 saw strong demand for business services, driven by digital transformation, cost efficiency needs, increased adoption of flexible workforce solutions, and increased focus on compliance and regulatory adherence.
Business services providers that leveraged technology and adapted to market needs for flexibility, regulatory adherence, and sustainability benefited the most. The quarter highlighted the sector's adaptability in supporting companies through economic uncertainties while capitalizing on long-term growth opportunities in digital, regulatory, and sustainability domains.
Per the latest Earnings Trend report, earnings of S&P 500 members of the business services sector that have reported results this season grew 5.2% year over year on 4.9% revenue growth, with 81.3% of the companies beating EPS estimates and 72.9% topping sales projections.
The sector's S&P 500 members' total quarterly earnings are currently anticipated to grow 5.4% year over year, and revenues are likely to rise 6.5%.
A handful of companies from the sector, like Fiserv, Inc. (NYSE: FI), Booz Allen Hamilton Holding Corporation (NYSE: BAH), S&P Global Inc. and Automatic Data Processing, Inc. (NASDAQ: ADP), are expected to beat estimates in the ongoing reporting cycle.
Let us discuss the factors that are likely to have played a key role in shaping the performance of business services companies in the quarter.
Steady Growth in Services Sector Amid Strong Demand
With service activities in the pink, business service demand rose steadily in the quarter. By the end of the third quarter, the Services PMI, measured by the Institute for Supply Management, had stayed above the 50% mark for the 49th time in 52 months.
Sector-specific factors that acted as tailwinds in the quarter are the essentiality of certain services like waste management, the rise in demand for risk ...
