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4 S&P 500 Retail Stocks That Appear Solid Bets for 2021
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The economy has had a roller-coaster ride in 2020. Starting on an upbeat note, the year took a nasty turn with the outbreak of the novel coronavirus that snapped the Wall Street’s longest ever bull run in March. In fact, the S&P 500 index fell as low as 2,191.86 on Mar 23. But since then, the index took off on a meteoric rally, surging roughly 67%. Timely intervention to provide financial support helped heal much of the economic damage inflicted by the pandemic. Surprisingly, the year has turned out to be a blissful one for investors.
Well looking at the bullish run, market pundits are of the opinion that the index may hit new highs in 2021 on the backdrop of still-low interest rate environment, distribution of COVID-19 vaccine and the new stimulus deal that aims to spark a lasting economic recovery. Notably, the Federal Reserve raised its 2021 real GDP forecast to 4.2% from 4%. The Jerome Powell-led Fed also now envisions unemployment rate to be 5% in 2021, down from the prior estimate of 5.5%.
Definitely challenges will be there, as strains of coronavirus pandemic will not fade out soon. But a constructive economic policy will play a vital role in steering the market in the new year. For now, the $900-billion stimulus package has given the economy a new lease of life. This second economic-rescue measure will definitely provide some financial relief to millions of households and corporates that have been struggling after the initial coronavirus-relief package started to dry up.
Clearly, stimulus checks for individuals and children, and mass vaccination will lend the much-needed support to the economy. Economists cited that if business organizations and industries started to operate at an optimum level it could potentially ramp up hiring activity, and in turn prompt consumers to spend freely. Markedly, this will have a positive impact on corporates’ revenues and profits. Looking at the calendar-year picture for the S&P 500 index, earnings are expected to increase 21.9% on 7.7% higher revenues in 2021, per latest Earnings Preview article.
Investors can count on L Brands, Inc. , specialty retailer of women's intimate and other apparel, personal care, and beauty and home fragrance products. The company remains focused on containing costs, managing inventory and optimizing capital expenditures. It is on track with its previously announced profit improvement plan and intends to generate approximately $400 million in annual savings. L Brands continues to revamp its business by staying customer-focused, enriching assortments, and enhancing store and online experiences. Strength at Bath & Body Works segment and improved performance at Victoria’s Secret drove third-quarter fiscal 2020 results. Markedly, shares of this Zacks Rank #1 company have surged 107.4% in a year. Also, the Zacks Consensus Estimate for fiscal 2021 earnings has moved up 33.2% in the past 60 days. The company has an estimated long-term earnings growth rate of 13%.
You may also consider Chipotle Mexican Grill, Inc. (CMG - Free Report) , a chain of fast casual restaurants. The company has been benefiting from digital initiatives, collaboration with third-party delivery providers and menu innovation. It has redesigned and simplified the online ordering site, enabled online payment for catering and online meal customizations. The company opened its first digital-only restaurant — Chipotle Digital Kitchen — in Highland Falls, NY this November. The new prototype comprises pick-up and delivery options only and does not support dining areas and front-line service. To avail the services, guests need to order in advance through Chipotle.com, Chipotle app or third-party delivery partners. Also, a separate lobby is provided for the pick-up of large catering orders. The concept is focused on accelerating the digital business in non-traditional locations. Markedly, in third-quarter 2020, digital sales soared 202.5%, and represented 48.8% of sales. Remarkably, shares of this Zacks Rank #2 company have surged 66.3% in a year. Also, the Zacks Consensus Estimate for 2021 earnings has jumped 0.6% in the past 60 days. The company has an estimated long-term earnings growth rate of 20.7%.
We also suggest investing in Tractor Supply Company (TSCO - Free Report) . The company is gaining from several omni-channel investments, including curbside pickup, same-day and next-day delivery, a re-launched website, and a new mobile app. This led to triple-digit sales growth in the e-commerce business during third-quarter 2020. Notably, Buy Online Pickup in Store and Ship to Store services acted as key growth drivers, representing more than 80% of online orders. Further, its newly launched mobile app and the Neighbor's Club loyalty program bode well. Consequently, these have been boosting traffic, which, in turn, has been leading to customer acquisitions. This operator of rural lifestyle retail stores has provided long-term financial growth targets for the upcoming three to five years. It envisions achieving net sales growth of 6-7% with earnings per share likely to increase 8-10%. Impressively, shares of this Zacks Rank #2 company have surged 53% in a year. Also, the Zacks Consensus Estimate for 2021 earnings has jumped by a penny in the past 60 days.
Target Corporation (TGT - Free Report) is also worth betting on. This general merchandise retailer has been making investments to enhance omni-channel capacities, come up with new brands, and remodel or refurbish stores to cater to consumer demand and behavior in the new normal. The company has been consolidating its position in the food and beverage space with a robust portfolio of owned and exclusive brands. The company’s commitment to offer unique shopping experience with safe and convenient options, including contactless Drive Up and Order Pickup, and same-day delivery with Shipt, are worth a mention. We also note that shares of this Zacks Rank #2 company have surged 36.5% in a year. Also, the Zacks Consensus Estimate for fiscal 2021 earnings has jumped 9.1% in the past 60 days. The company has an estimated long-term earnings growth rate of 8.5%.
Zacks Top 10 Stocks for 2021
In addition to the stocks discussed above, would you like to know about our 10 top tickers for the entirety of 2021?
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4 S&P 500 Retail Stocks That Appear Solid Bets for 2021
The economy has had a roller-coaster ride in 2020. Starting on an upbeat note, the year took a nasty turn with the outbreak of the novel coronavirus that snapped the Wall Street’s longest ever bull run in March. In fact, the S&P 500 index fell as low as 2,191.86 on Mar 23. But since then, the index took off on a meteoric rally, surging roughly 67%. Timely intervention to provide financial support helped heal much of the economic damage inflicted by the pandemic. Surprisingly, the year has turned out to be a blissful one for investors.
Well looking at the bullish run, market pundits are of the opinion that the index may hit new highs in 2021 on the backdrop of still-low interest rate environment, distribution of COVID-19 vaccine and the new stimulus deal that aims to spark a lasting economic recovery. Notably, the Federal Reserve raised its 2021 real GDP forecast to 4.2% from 4%. The Jerome Powell-led Fed also now envisions unemployment rate to be 5% in 2021, down from the prior estimate of 5.5%.
Definitely challenges will be there, as strains of coronavirus pandemic will not fade out soon. But a constructive economic policy will play a vital role in steering the market in the new year. For now, the $900-billion stimulus package has given the economy a new lease of life. This second economic-rescue measure will definitely provide some financial relief to millions of households and corporates that have been struggling after the initial coronavirus-relief package started to dry up.
Clearly, stimulus checks for individuals and children, and mass vaccination will lend the much-needed support to the economy. Economists cited that if business organizations and industries started to operate at an optimum level it could potentially ramp up hiring activity, and in turn prompt consumers to spend freely. Markedly, this will have a positive impact on corporates’ revenues and profits. Looking at the calendar-year picture for the S&P 500 index, earnings are expected to increase 21.9% on 7.7% higher revenues in 2021, per latest Earnings Preview article.
That said here we have highlighted four stocks from Retail-Wholesale sector that have a Zacks Rank #1 (Strong Buy) or 2 (Buy) and are ready to help steer S&P 500 index to new highs in 2021. You can see the complete list of today’s Zacks #1 Rank stocks here.
4 Prominent Picks
Investors can count on L Brands, Inc. , specialty retailer of women's intimate and other apparel, personal care, and beauty and home fragrance products. The company remains focused on containing costs, managing inventory and optimizing capital expenditures. It is on track with its previously announced profit improvement plan and intends to generate approximately $400 million in annual savings. L Brands continues to revamp its business by staying customer-focused, enriching assortments, and enhancing store and online experiences. Strength at Bath & Body Works segment and improved performance at Victoria’s Secret drove third-quarter fiscal 2020 results. Markedly, shares of this Zacks Rank #1 company have surged 107.4% in a year. Also, the Zacks Consensus Estimate for fiscal 2021 earnings has moved up 33.2% in the past 60 days. The company has an estimated long-term earnings growth rate of 13%.
You may also consider Chipotle Mexican Grill, Inc. (CMG - Free Report) , a chain of fast casual restaurants. The company has been benefiting from digital initiatives, collaboration with third-party delivery providers and menu innovation. It has redesigned and simplified the online ordering site, enabled online payment for catering and online meal customizations. The company opened its first digital-only restaurant — Chipotle Digital Kitchen — in Highland Falls, NY this November. The new prototype comprises pick-up and delivery options only and does not support dining areas and front-line service. To avail the services, guests need to order in advance through Chipotle.com, Chipotle app or third-party delivery partners. Also, a separate lobby is provided for the pick-up of large catering orders. The concept is focused on accelerating the digital business in non-traditional locations. Markedly, in third-quarter 2020, digital sales soared 202.5%, and represented 48.8% of sales. Remarkably, shares of this Zacks Rank #2 company have surged 66.3% in a year. Also, the Zacks Consensus Estimate for 2021 earnings has jumped 0.6% in the past 60 days. The company has an estimated long-term earnings growth rate of 20.7%.
We also suggest investing in Tractor Supply Company (TSCO - Free Report) . The company is gaining from several omni-channel investments, including curbside pickup, same-day and next-day delivery, a re-launched website, and a new mobile app. This led to triple-digit sales growth in the e-commerce business during third-quarter 2020. Notably, Buy Online Pickup in Store and Ship to Store services acted as key growth drivers, representing more than 80% of online orders. Further, its newly launched mobile app and the Neighbor's Club loyalty program bode well. Consequently, these have been boosting traffic, which, in turn, has been leading to customer acquisitions. This operator of rural lifestyle retail stores has provided long-term financial growth targets for the upcoming three to five years. It envisions achieving net sales growth of 6-7% with earnings per share likely to increase 8-10%. Impressively, shares of this Zacks Rank #2 company have surged 53% in a year. Also, the Zacks Consensus Estimate for 2021 earnings has jumped by a penny in the past 60 days.
Target Corporation (TGT - Free Report) is also worth betting on. This general merchandise retailer has been making investments to enhance omni-channel capacities, come up with new brands, and remodel or refurbish stores to cater to consumer demand and behavior in the new normal. The company has been consolidating its position in the food and beverage space with a robust portfolio of owned and exclusive brands. The company’s commitment to offer unique shopping experience with safe and convenient options, including contactless Drive Up and Order Pickup, and same-day delivery with Shipt, are worth a mention. We also note that shares of this Zacks Rank #2 company have surged 36.5% in a year. Also, the Zacks Consensus Estimate for fiscal 2021 earnings has jumped 9.1% in the past 60 days. The company has an estimated long-term earnings growth rate of 8.5%.
Zacks Top 10 Stocks for 2021
In addition to the stocks discussed above, would you like to know about our 10 top tickers for the entirety of 2021?
These 10 are painstakingly hand-picked from over 4,000 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Start Your Access to the New Zacks Top 10 Stocks >>