Core Insights - The Zacks Outsourcing industry is experiencing rising demand for business process outsourcing (BPO) due to its flexibility and cost-effectiveness, alongside increasing cybersecurity risks driving the need for outsourcing solutions [1][5][6] Industry Overview - Outsourcing involves delegating internal operations to external resources to enhance operational efficiency, primarily serving small and medium-sized enterprises [3] - Services offered include HR support, payroll management, benefits administration, retirement planning, and insurance services, allowing businesses to focus on core competencies [4] Current Trends - There is consistent growth in BPO and IT outsourcing, with a long-term outlook indicating that outsourced IT services will encompass a wide range of functions, driven by a shortage of in-house engineering talent [5] - The urgency for robust cybersecurity measures is increasing, with companies focusing on employee training and outsourced cybersecurity services to mitigate risks [6] - Innovations such as IoT, cloud computing, AI, and ML are transforming the outsourcing landscape, improving efficiency and competitiveness [7][8] Industry Performance - The Zacks Outsourcing industry currently holds a Zacks Industry Rank of 35, placing it in the top 14% of 246 Zacks industries, indicating bright near-term prospects [9] - Over the past year, the industry has underperformed compared to the broader Zacks Business Services sector and the S&P 500, declining by 1.9% while the sector and S&P 500 grew by 3.7% and 17.7%, respectively [11] - The industry trades at a forward 12-month price-to-earnings (P/E) ratio of 16.43X, lower than the S&P 500's 23.34X and the sector's 21.4X, indicating a cheaper valuation compared to peers [12] Promising Companies - **The Brink's Company (BCO)**: Provides cash and valuables management services with a 5% organic growth rate in Q2 2025, driven by strong demand for precious metals and successful customer acquisition efforts [13][15] - **Barrett Business Services, Inc. (BBSI)**: A Professional Employer Organization with a record increase of 10,100 worksite employees added year-over-year in Q2 2025, supported by strong client retention and new product adoption [16][17] - **Capgemini SE (CGEMY)**: A consulting company with robust commercial momentum, achieving a book-to-bill ratio of 1.08 in Q2 2025, driven by high-value services in Cloud and Data, and AI [18][20]

Core Insights - The rising demand for business process outsourcing (BPO) is driven by flexibility and low costs, with trends like IoT, cloud computing, AI, and ML transforming the sector [1][4][6] Industry Overview - Outsourcing involves delegating internal operations to external resources to enhance operational efficiency, primarily catering to small and medium-sized enterprises [3] - Services include HR support, payroll management, benefits administration, retirement planning, and insurance services, allowing businesses to focus on core competencies [3] Future Trends - There is consistent growth in business process and IT outsourcing due to increased demand for flexibility, lower costs, and improved service quality [4] - The shortage of in-house engineering talent is expected to drive the outsourcing trend [4] - The urgency for robust cybersecurity measures is increasing, leading companies to outsource cybersecurity services to mitigate risks and maintain compliance [5] Industry Performance - The Zacks Outsourcing industry currently holds a Zacks Industry Rank of 35, placing it in the top 14% of 246 Zacks industries, indicating bright near-term prospects [7] - Over the past year, the Zacks Outsourcing industry has underperformed compared to the broader Zacks Business Services sector and the S&P 500, declining by 1.9% against the sector's 3.7% growth and the S&P 500's 17.7% growth [9][10] Valuation Metrics - The industry is trading at a forward 12-month price-to-earnings (P/E) ratio of 16.43X, lower than the S&P 500's 23.34X and the sector's 21.4X [13] Promising Companies - **Brink's Company (BCO)**: Provides cash and valuables management services with a 5% organic growth rate in Q2 2025, driven by strong demand for precious metals and successful customer acquisition [17][19] - **Barrett Business Services, Inc. (BBSI)**: A Professional Employer Organization with a record increase of 10,100 worksite employees added year-over-year in Q2 2025, supported by strong client retention and new product adoption [20][21] - **Capgemini SE (CGEMY)**: Focuses on business transformation and consulting, with a robust book-to-bill ratio of 1.08 and a contribution of nearly 7% from GenAI and Agentic AI in Q2 2025 [22][23][25]

Core Insights - The staffing industry is evolving rapidly due to digital innovation, demographic changes, and the demand for flexible work arrangements, making effective staffing essential for companies to remain competitive and agile [2][3] Industry Overview - The staffing ecosystem has transformed, with organizations seeking strategic partners who understand talent needs and market trends, utilizing AI-enabled recruitment tools and talent analytics for smarter hiring decisions [2] - The global competition for talent is intensifying, increasing the value of adaptable and tech-savvy staffing firms, which are now seen as growth enablers rather than mere support functions [3] Investment Opportunities - The staffing sector presents compelling investment opportunities, with companies like Workday, Inc. (WDAY), First Advantage Corporation (FA), and Barrett Business Services (BBSI) positioned as key players in workforce transformation [4] - As hiring accelerates and labor markets evolve, staffing companies are at the forefront, providing scalable solutions that drive economic growth and long-term value creation [4] Company Highlights - Workday is focusing on AI-driven innovation and global expansion, raising its fiscal 2026 guidance to $8.815 billion in subscription revenue, reflecting strong demand and operational discipline [7] - First Advantage Corporation has shown solid financial performance, meeting high-end projections and experiencing positive momentum in international markets, particularly in its Digital Identity solutions [8][9] - Barrett Business Services combines HR outsourcing with professional management consulting, emphasizing personalized client interactions and local market expertise, which supports its sustained growth [10][11][12]

Core Viewpoint - Barrett Business Services (BBSI) has received an upgrade to a Zacks Rank 2 (Buy), indicating a positive trend in earnings estimates which is a significant factor influencing stock prices [1][4]. Earnings Estimates and Ratings - The Zacks rating system is primarily based on a company's changing earnings picture, with the Zacks Consensus Estimate tracking EPS estimates from sell-side analysts [2]. - The Zacks rating upgrade for Barrett reflects an improved earnings outlook, which is likely to positively impact its stock price [4][6]. Impact of Earnings Estimates on Stock Prices - Changes in a company's future earnings potential, as indicated by earnings estimate revisions, are strongly correlated with near-term stock price movements [5]. - Institutional investors often rely on earnings estimates to determine the fair value of a company's shares, leading to significant price movements based on their buying or selling actions [5]. Recent Performance of Barrett - For the fiscal year ending December 2025, Barrett is expected to earn $2.19 per share, which remains unchanged from the previous year [9]. - Over the past three months, the Zacks Consensus Estimate for Barrett has increased by 4%, indicating a positive trend in earnings estimates [9]. Zacks Rank System Overview - The Zacks Rank system classifies stocks into five groups based on earnings estimates, with a proven track record of Zacks Rank 1 stocks generating an average annual return of +25% since 1988 [8]. - The upgrade of Barrett to a Zacks Rank 2 places it in the top 20% of Zacks-covered stocks, suggesting a strong potential for market-beating returns in the near term [11].

Company Overview - Barrett Business Services (BBSI) currently holds a Momentum Style Score of B and a Zacks Rank of 2 (Buy) [3][4] - The company operates in the human resources management sector and is being evaluated for its momentum potential [4] Price Performance - BBSI shares have increased by 0.06% over the past week, while the Zacks Outsourcing industry remained flat during the same period [6] - Over the past month, BBSI's price change is 10.81%, compared to the industry's 11.91% [6] - In the last quarter, BBSI shares rose by 15.39%, and over the past year, they gained 33.66%, outperforming the S&P 500, which moved 9.68% and 16.9% respectively [7] Trading Volume - The average 20-day trading volume for BBSI is 169,413 shares, indicating a baseline for price-to-volume analysis [8] Earnings Estimates - In the past two months, two earnings estimates for BBSI have been revised upwards, increasing the consensus estimate from $2.11 to $2.19 [10] - For the next fiscal year, one estimate has moved upwards with no downward revisions [10] Conclusion - Considering the positive price performance, trading volume, and favorable earnings outlook, BBSI is positioned as a promising momentum stock with a Momentum Score of B [12]

Core Viewpoint - Barrett (BBSI.US) has had its MSCI ESG rating downgraded from BB to B as of August 11, 2025 [1] Group 1 - The downgrade reflects a significant change in Barrett's ESG performance metrics [1]

Core Viewpoint - Growth investors seek stocks with above-average financial growth, but identifying such stocks can be challenging due to associated risks and volatility [1] Group 1: Company Overview - Barrett Business Services (BBSI) is currently recommended as a cutting-edge growth stock by the Zacks Growth Style Score system, which evaluates a company's real growth prospects beyond traditional metrics [2] - Barrett has a favorable Growth Score and a top Zacks Rank, indicating strong potential for growth investors [10] Group 2: Earnings Growth - The historical EPS growth rate for Barrett is 13.1%, with projected EPS growth of 8.1% this year, significantly outperforming the industry average of 5.5% [5] Group 3: Asset Utilization - Barrett's asset utilization ratio (sales-to-total-assets ratio) is 1.6, indicating that the company generates $1.6 in sales for every dollar in assets, surpassing the industry average of 1.32 [6] Group 4: Sales Growth - The company's sales are expected to grow by 9.5% this year, compared to the industry average of 1.3%, highlighting Barrett's strong sales growth potential [7] Group 5: Earnings Estimate Revisions - The current-year earnings estimates for Barrett have been revised upward, with the Zacks Consensus Estimate increasing by 1.7% over the past month, indicating positive momentum [8]

Core Insights - The staffing industry is evolving rapidly due to digital innovation, demographic changes, and the demand for flexible work arrangements, making effective staffing solutions critical for companies [3][4] - Staffing firms are increasingly viewed as growth enablers, helping organizations navigate economic uncertainties and scale for growth [4][5] Industry Overview - The staffing ecosystem has transformed, with organizations seeking strategic partners who understand talent needs and market trends [3] - Technology, including AI-enabled recruitment tools and talent analytics, is becoming standard in staffing strategies, allowing for faster and smarter hiring decisions [3] Investment Opportunities - The staffing sector presents compelling opportunities for investors, with firms like ADP, Korn Ferry, and Barrett Business Services positioned as key players in workforce transformation [5][6] - As hiring accelerates, staffing companies are at the forefront of providing scalable solutions that contribute to economic growth and long-term value creation [5] Company Highlights - **ADP**: A leader in human capital management solutions, ADP reported revenues of $5.1 billion for Q3 fiscal 2025, a 5.7% year-over-year increase, and is focused on expanding its cloud-based HCM and HR outsourcing solutions [8][9] - **Korn Ferry**: Specializes in executive search and workforce transformation, leveraging data-driven insights and AI tools to enhance hiring processes and leadership development [10][11][12] - **Barrett Business Services (BBSI)**: Provides HR outsourcing and management consulting, focusing on personalized client interactions and local market expertise, which supports its sustained growth [13]

Core Insights - Barrett Business Services (BBSI) reported revenue of $2.23 billion for the quarter ended June 2025, reflecting a year-over-year increase of 10.1% and surpassing the Zacks Consensus Estimate by 2.28% [1] - The earnings per share (EPS) for the same period was $0.70, compared to $0.62 a year ago, resulting in an EPS surprise of 7.69% over the consensus estimate of $0.65 [1] Financial Performance Metrics - Gross billings reached $2.23 billion, exceeding the average estimate of $2.18 billion from two analysts [4] - Revenue from professional employer services was $290.17 million, surpassing the average estimate of $280.04 million, with a year-over-year change of 11.7% [4] - Revenue from staffing services was $17.49 million, which fell short of the estimated $18.56 million, representing a year-over-year decline of 11.5% [4] Stock Performance - Barrett's shares have returned +4.1% over the past month, outperforming the Zacks S&P 500 composite's +0.5% change [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [3]

Financial Data and Key Metrics Changes - Gross billings increased by 10.1% year-over-year to $2.23 billion in Q2 2025, compared to $2.03 billion in Q2 2024 [15] - PEO gross billings rose by 10.3% to $2.22 billion, while staffing revenues declined by 12% to $17 million [15] - Net income per diluted share increased to $0.70 from $0.62 in the prior year quarter, reflecting strong revenue growth and operating leverage [20] Business Line Data and Key Metrics Changes - The staffing business experienced an 11.5% decline year-over-year, attributed to macroeconomic uncertainty and client reluctance to fill staffing orders [6][15] - PEO worksite employees (WSEs) grew by 8%, driven by a record number of new client additions [15] - Average billing per WSE increased by 1.7%, influenced by rising wages but offset by lower average hours worked [20] Market Data and Key Metrics Changes - Southern California, the largest region, saw a 12% growth, while the Pacific Northwest declined by 4% [16] - Asset light markets experienced a significant growth of 100% [16] - Client hiring remained modest and below historical levels, impacting overall workforce growth [6][15] Company Strategy and Development Direction - The company is focusing on expanding its product offerings, particularly in health insurance, to capture a broader market, including white-collar businesses [10][40] - Investments in technology and product enhancements are aimed at improving client service and expanding the total addressable market [10][41] - The company plans to open one or two additional branches by the end of the year, following successful entries into Chicago and Dallas [8][62] Management's Comments on Operating Environment and Future Outlook - Management noted macroeconomic uncertainty has caused clients to pause hiring, but they remain optimistic about future growth driven by new client acquisitions [6][13] - The company has increased its growth outlook for the remainder of the year, expecting gross billings to rise between 9% and 10% [22] - Management emphasized the importance of controllable growth and client retention as key drivers of future performance [45] Other Important Information - The company has a strong balance sheet with $90 million in unrestricted cash and no debt [20] - A new $100 million stock repurchase program was approved, reflecting the company's commitment to returning value to shareholders [22] - The workers' compensation program continues to perform well, with favorable adjustments recognized in the quarter [17][18] Q&A Session Summary Question: Status of workers' compensation rate increase - The California regulatory board recommended an over 11% rate increase, but the approved rate was around 9%, expected to push pricing up [27][28] Question: Impact of workers' compensation adjustments - The $8.8 million adjustment was consistent with prior year adjustments, indicating normal performance [32] Question: Profit potential from workers' compensation renewal - The renewal is expected to improve profit potential, especially if claims continue to perform better than expected [36][38] Question: Technology enhancements and market positioning - The company aims to aggressively target the white-collar market with new technology offerings, expanding its total addressable market [40][41] Question: Performance of healthcare policies - The healthcare market is expected to see higher renewal rates, with the company viewing this as an opportunity for growth [42][44] Question: Considerations for raising guidance - Strong year-to-date performance and consistent controllable growth led to the decision to raise guidance for the remainder of the year [45][46]