4 Staffing Stocks to Watch on Growing Services Sector Activity

The U.S. services sector has been growing steadily ever since the economy started reopening after the pandemic-induced lockdown. So far, it has been a great 2022, with business operating almost in full swing, which has seen people going back to offices. This has also seen a record number of jobs being added to the economy, while jobless claims have been on a sharp decline.

The solid reading in ISM Services PMI also proves that despite investors sentiment keeping low owing to rising rates and the ongoing geopolitical tensions, the services sector hasn’t been impacted much. Given this situation, stocks of staffing firms like Kforce Inc. KFRC, KornFerry International KFY, Randstad N.V. RANJY and Robert Half International Inc. RHI are likely to benefit in the near term.

Services Sector Continues to Expand

According to the latest reading from the Institute of Supply Management (ISM), the services purchasing managers’ index (PMI) came up with a reading of 58.3 in March, up from 56.5 recorded in February. The Business Activity Index rose to 55.5 in March from 55.1 in the earlier month.

The services sector accounts for over two-thirds of all economic activity in the United States. A reading of anything above 50 suggests an increase in service activities. Given that the pandemic is anything but over, the reading portrays a rosy image of the economy.

Also, the New Orders Index climbed to 60.1 in March from 56.1 in February. The Employment Index rose to an impressive reading of 54 from 48.5 recorded in February.

The reports also mentioned that 17 industries reported growth in March, led by Educational Services; Arts, Entertainment & Recreation; Utilities; Construction; Wholesale Trade and Accommodation & Food Services.

Solid Job Gains in March

As the economy continues to reopen, more people are going back to offices and schools. Also, factories restaurants and other entertainment joints have started functioning at the optimum level. This has led to a rise in vacancies, which has seen a solid surge in hiring.

The U.S. economy added 431,000 jobs in March. Also, the unemployment level hit a pandemic-era low of 3.6%, according to the latest report from the Labor Department.

The unemployment level had hit a 50-year low of 3.5% just before the coronavirus outbreak in March 2020. However, following that, factories and businesses had to be temporarily shut down, which saw millions losing jobs or getting furloughed.

The situation is gradually changing, and the economy is now almost fully functional. A surge in hiring and a decline in the unemployment level, which now almost matches the pre-pandemic era levels, is an indication of that.

The economy is presently just 1.6 million jobs or 1% short of where the employment level was in February 2020.

Stocks to Watch

Given this situation, investors should keep an eye on the following staffing stocks.

Kforce Inc. and its subsidiaries provide professional staffing services and solutions to clients on both a temporary and permanent basis through its Technology, and Finance and Accounting segments. KFRC’s Tech Segment provides both Flex and Direct Hire services to clients, focusing primarily on areas of information technology such as systems/applications architecture and development, data management, business and artificial intelligence, machine learning and network architecture and security. Kforce Inc’s FA segment provides both Flex and Direct Hire services to clients in areas such as accounting, transactional finance, financial analysis and reporting, taxation, budgeting, loan servicing, professional administration, audit services and systems and controls analysis and documentation.

Kforce’s expected earnings growth rate for the current year is 19.5%. The Zacks Consensus Estimate for current-year earnings has improved 11.7% over the past 60 days. KFRC has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

KornFerry International is the world's leading and largest executive recruitment firm with the broadest global presence in the executive recruitment industry. KFY provides executive recruitment services exclusively on a retained basis and serves the global recruitment needs of our clients from middle to executive management. KornFerry International’sclients are many of the world's largest and most prestigious public and private companies, middle-market and emerging growth companies as well as governmental and not-for-profit organizations.

KornFerry International’s expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 5.5% over the past 60 days. KFY has a Zacks Rank #1.

Randstad N.V. operates as a global provider of HR services, including temporary staffing, permanent placement, recruitment of middle and senior managers, on site consulting, seconded specialists and specialized HR services. RANJY’s staffing segment service comprise temporary staffing, permanent placement and (high-volume) specialties; the inhouse service segment specializes in the provision of high-volume, skilled flexible labor; aimed at improving labor flexibility, retention, productivity and efficiency while HR solutions & managed services segment offers a comprehensive range of HR project management, HR management and HR consultancy services. Randstadalso recruits supervisors, managers, professionals, interim specialists and consultants with professional qualifications for middle and senior management positions.

Randstad’s expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 6.5% over the past 60 days. RANJY has a Zacks Rank #1.

Robert Half International Inc. is one of the world's largest providers of professional consulting and staffing services. RHI is benefiting from strength in Protiviti, the company’s subsidiary through which it offers risk consulting, internal audit and information technology consulting services.Robert Half's shares outperformed its industry in the past year, partly due to consecutive earnings and revenue beats in the past four quarters.

Robert Half's expected earnings growth rate for the current year is 15.7%. Shares of RHI have gained 3.4% in the past six months. RHI has a Zacks Rank #3 (Hold).

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