Goldman Sachs analyst George K. Tong expects companies in America's business & Information Services sector to lean into technology and innovation to bolster their competitive positioning and drive internal efficiencies against a tenuous external backdrop.
The Business & Information Services sector increased an average of 20.8% in 2023, below that of the S&P 500's 24.2% increase, with Information Services advancing 25.0% and Business Services up 15.3%, the analyst notes.
Lower inflation and interest rates toward the back half of the year should drive improved B2B spending and consumer credit trends, the analyst writes.
While the Business and Info Services sector has disparate exposure to end markets, business models, and service offerings, the best companies have commonalities of scale, essentialness of services, oligopolistic market structures, and pricing power.
Looking ahead to 2024, the analyst has a positive outlook for organic revenue growth in the Info Services sector, with Business Services growth likely to be more muted, per the analyst.
In FY24, the analyst forecasts Info Services average EBITDA margins to be a healthy 39.3% in 2024, almost twice that of Business Services at 21.1%, due to low human capital intensity and operating leverage.
The analyst reiterated a Buy rating on Cintas Corporation (NASDAQ: CTAS), with aFull story available on Benzinga.com