For Immediate Release

Chicago, IL – July 14, 2014 – Today, Zacks Equity Research discusses the Business Services, including Avis Budget Group, Inc. (CAR-Free Report) and ExamWorks Group, Inc. (EXAM-Free Report).

Industry: Business Services

Link: http://www.zacks.com/commentary/33392/business-services--the-shift-is-on

Stocks for Building Your Portfolio

Considering Zacks Rank, share prices, earnings surprise history and future growth prospects, we think the following two stocks are worth taking a close look.

Avis Budget Group, Inc. (CAR-Free Report): This provider of vehicle rental services through a network of car and truck rental locations in the U.S., Canada, Australia, New Zealand, Latin America, the Caribbean, and parts of Asia, delivered positive earnings in the last four quarters in with an average beat of almost 30.79%. The stock gained about 53% year to date, hitting its 52-week high of $61.95 on Jul 3.

With initiatives such as changing business mix and focus on accelerating profitable unit- bearing fruit, both volume and price continue to witness an uptrend. Its inorganic story looks impressive with several acquisitions. The company also remains focused on controlling costs. Its share buyback program is on track and continues to aid its bottom line, thereby enhancing shareholders’ returns.

Our model projects earnings growth of about 26.5% for Avis Budget over the long term.

ExamWorks Group, Inc. (EXAM-Free Report): This provider of independent medical examinations (IMEs), peer and bill reviews, Medicare compliance, and other related services delivered positive earnings in the last four quarters in with an average beat of almost 40.72%. Share prices also gained about 21% year to date. Given the prospect of the company, we find more potential left. Our model projects earnings to grow about 20% over the long term.

The company continues to benefit from superior organic growth, technology solutions that drive operating leverage and expanding margins, and considerable cash flow. Its compelling inorganic growth story is also expected to boost the performance level.

Both Avis Budget and ExamWorks sport a Zacks Rank #1 (Strong Buy).

What Keeps Business Service Rolling

The most important feature of this industry is that it is labor intensive – creating employment – given the nature of intangible products offered by the service sector. Business reports indicate that the two most populated countries, China and India, are together expected to create 300 million employment opportunities in the global job market by 2030. According to International Monetary Fund, unemployment rate in the U.S. is expected to decline going forward – from 6.7% in 2013 to 6.2% in 2014 and 5.9% in 2015.

The industry offers specialized services based on the latest technologies. With specialized services, these providers reduce the operational cost and in turn the overall cost of companies, thereby benefiting margins. Notably, an increased number of companies opting for such specialized services would expand volumes for service providers. This would eventually lead to services at lower costs and a further reduction in costs for companies.

The industry offers global reach, helping the company widen its customer base and maintain a better retention ratio. It also opens the door to international trade.

Though the first quarter witnessed a slowdown, the International Monetary Fund estimates that U.S. GDP growth will improve to 2% in 2014 and accelerate to 3% in 2015 from 1.9% in 2013. This opens more opportunities for the service sector.

Headwinds

A major challenge faced by this industry is spending by companies to avail of services from business service providers. This, in turn, is directly tied to the health of the economy.

As this industry provides specialized services, it involves continuous spending on research and development as well as training, maintaining skilled workforce. While continuous research and development help it acclimatize or adapt to new services to account for the ongoing development, training and maintaining skilled workforce limit high turnover rate.

Increasing competition also threatens this industry. As the main business of one company can be a business service for another, maintaining or increasing market share can pose risks to business service providers.

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