2 Business Services Firms Poised to Beat Estimates This Earnings Season

The U.S. service sector exhibited robust momentum in Q1 2025, driven by economic stability, an expansive Services PMI (50.8% in July), and factors like AI adoption, demand for cost efficiency, and regulatory compliance. This sector resilience, coupled with a strong 3% GDP growth in Q2 2025, underscores its critical contribution to broader economic stability. Amid upcoming earnings reports, PagSeguro Digital (PAGS) and Bit Digital (BTBT) are highlighted as potential earnings beat candidates for Q2 2025, identified through a proprietary methodology combining positive Earnings ESP and favorable Zacks Ranks, offering specific investment insights within this strong sector.

Analysis

The U.S. service sector demonstrates robust health, underpinned by a sharp rebound in GDP growth to 3% in Q2 2025 from a 0.5% decline in Q1, and a Services PMI that has signaled expansion for 11 of the past 12 months, standing at 50.8% in July. Against this strong macroeconomic backdrop, two companies are highlighted for their potential to outperform earnings expectations based on a proprietary model combining a positive Earnings ESP and a favorable Zacks Rank. PagSeguro Digital (PAGS) presents a compelling case with a Zacks Rank of 2 (Buy), a positive Earnings ESP of +8.20%, and a strong track record of beating consensus estimates in the last four consecutive quarters. While consensus projects a 3.2% year-over-year decline in EPS to 31 cents, revenue is expected to grow 2.8% to $898.6 million, suggesting a potential upside surprise is probable. Conversely, Bit Digital (BTBT) offers a more speculative profile. Despite a very high Earnings ESP of +20.00%, its Zacks Rank is 3 (Hold), and consensus estimates point to significant fundamental deterioration with a 12.4% revenue decline and a 200% widening of its per-share loss. BTBT's inconsistent history of meeting estimates, with two misses in the last four quarters, adds a layer of risk, indicating that while a beat against low expectations is possible, the underlying business faces substantial headwinds.

Key Decisions for Investors

• Investors considering PagSeguro (PAGS) should weigh its strong history of earnings beats and positive quantitative signals against the consensus forecast for a slight year-over-year earnings decline, making it a potential catalyst-driven trade for those bullish on fintech.
• Bit Digital (BTBT) represents a high-risk, high-volatility opportunity; its significant +20.00% Earnings ESP suggests a potential beat, but this must be balanced against projections of declining revenue, widening losses, and a mixed earnings history, making it suitable only for investors with a high risk tolerance.
• Monitor the broader economic indicators, such as the Services PMI, as continued strength in the service sector provides a favorable environment for well-positioned companies but may not offset the firm-specific fundamental challenges faced by names like BTBT.
• Recognize that the investment thesis is heavily reliant on a proprietary earnings prediction model, and a positive earnings surprise does not always translate into positive share price performance, particularly when underlying fundamentals are deteriorating.