Fall is definitely here, as football is in full swing, the leaves are changing and the sweltering summer is giving way to cooler fall temperatures. We also are seeing many of the firms we cover here at 24/7 Wall St. making some changes to their high-conviction stock picks, and some of the additions may have produced outstanding third-quarter results.

In a new Baird research report, the analysts who cover the fast growing business process outsourcing arena shuffle their top picks in front of earnings. The report noted this:

The Baird focus idea report was published for October and we included two new companies this month (and removed one from our monthly focus ideas list). We think both stocks are set up to beat calendar third quarter estimates, view out-year estimates as biased higher, and view valuation as compelling.

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Here we cover the new additions, Genpact Ltd. (NYSE: G) and Visa Inc. (NYSE: V), as well as an additional stock that looks very compelling now. All three companies are rated Overweight at Baird.

Genpact

This off-the-radar company was added to the top ideas list for October. Genpact provides business process outsourcing and information technology (IT) management services worldwide. The company offers finance and accounting services, including accounts payable comprising document management, invoice processing, approval, resolution management and T&E processing, as well as order to cash services, such as customer master data management, credit and contract management, fulfillment, billing, collections, and dispute management services.

Set up as the captive General Electric business process management arm in 1997, it became a third-party vendor in 2005. The company derives approximately 82% of revenues from business process management and about 18% from IT services. Vertically, revenues are split as 40% from financial services/insurance, 37% from manufacturing and the rest from diversified industries. General Electric currently accounts for 11% of revenues.

The Baird report noted:

We view the 6% discount to the S&P’s next twelve months price to earnings as compelling (three-year average 4% premium) given estimates biased a little higher, comps trade at/above three-year averages, and the mix of business is improving.

Genpact shareholders are paid a small 0.83% dividend. The Baird price target for the shares is $34. That compares to the Wall Street consensus target of $30.77. The shares closed trading on Tuesday at $28.94.

Visa

This top credit card firm is becoming a huge leader in digital pay and is also a new addition to the top ideas list. Visa is a global payments technology company that connects consumers, businesses, financial institutions and governments in more than 200 countries and territories to fast, secure and reliable electronic payments. The company operates one of the world’s most advanced processing networks, VisaNet, that is capable of handling more than 56,000 transaction messages a second, with fraud protection for consumers and assured payment for merchants.

Visa is not a bank and does not issue cards, extend credit or set rates and fees for consumers. Visa’s innovations, however, enable financial institution customers to offer consumers more choices: pay now with debit, pay ahead of time with prepaid or pay later with credit products.

The Baird analyst said:

Our price target reflects a 47% premium to the S&P’s NTM price to earnings, around the three-year average of 49%. We believe trends are a little better than the average of the past three years (we think we may have entered a period of EPS growth near high-teens/20% due to VE/tax rate/buybacks/Costco), but are attempting to be modestly conservative.

The company posted solid earnings and the guidance was effectively raised to the high-end of the range.

Shareholders receive a 0.63% dividend. Baird has a $128 price target, while the posted consensus is $112.53. Shares closed Tuesday at $105.59.

DST Systems

This is another top company Baird likes into earnings. DST Systems Inc. (NYSE: DST) is a business solutions company that provides information processing to clients in a variety of industries, such as asset management, retirement, insurance, and health care.

The stock was hit back in the summer after a large U.K. client loss. While the shares have recovered, they are still trading below the levels they were at in June. Baird noted this:

Our price target reflects ~8-8.5 times 2018 estimated core EBITDA per the sum-of-parts. It also reflects ~18X 2018 estimated earnings per share, which is around the S&P’s current next 12 months P/E, and below the company’s three-year average of ~8% premium (range 7% discount to 26% premium) due to choppy growth and fewer low-yielding (but valuable) assets left on the balance sheet.

Shareholders are paid a 1.31% dividend. The $64 Baird price target is less than the consensus target of $65.20. The stock closed on Tuesday at $55.40.

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Three stocks to buy now in a sector that is showing solid exponential growth. While not suitable for all accounts, they are just the ticket for growth portfolios with some risk tolerance.

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