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U.S. Consumer Spending Improving: 4 Stocks to Keep an Eye On

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More than a year after the onset of the coronavirus outbreak, there are clear indications that the U.S. economy is on the path to gradual recovery. President Biden’s massive pandemic-relief package and large-scale vaccination programs being executed across the United States have been aiding the recovery process.

With the reviving economy, business activity across several sectors have resumed and is trending favorably.

Stimulus payments to consumers have induced spending. Notably, the purchasing power remained subdued amid the pandemic with apprehensions regarding unemployment and need to save more.

With increased purchasing power, Americans will be inclined to spend more on discretionary products. They will also gain confidence in cross-border travel, which suffered a blow amid the pandemic.

A survey conducted by McKinsey observed a growing digital economy and increased credit-card spending so far this year, which in turn, have been providing a boost to the U.S. economy growth. Per Mastercard’s (MA - Free Report) Spending Pulse, U.S. retail sales excluding automotive and gas are anticipated to rise 5.5% over the Jul 15-Sep 6 period of this year. The figure is calculated with respect to the Jul 16-Sep 7 period of 2020.

Moreover, impressive reading recorded by Visa’s (V - Free Report) U.S. Spending Momentum Index (SMI) in May 2021 hint toward a gradual recovery in the consumer sector. In the month, the Visa SMI stated that 59% of consumers are indulging in more spending compared with the year-ago period, while 41% of them are spending the same or less than they did a year ago.

Despite a number of lingering concerns including virus mutations, the abovementioned findings are likely to create an optimistic sentiment amid consumers.

Further, companies backed with a robust digital payments suite will gain from the economy recovery. Time and again, several payments technology companies have  rolled out cost-effective solutions to address the needs.

The focus has been on empowering people to make swift payments ranging from addressing daily life needs to meeting the much-needed healthcare costs.

Even after the pandemic subsides, the popularity of digital payments is likely to continue in the days ahead.

4 Top Stocks to Watch

These four Zacks #3 (Hold) Ranked stocks mentioned below have been rolling out a diverse range of digital payment solutions to cater to the demand. This, in turn, positions them well to gain as the U.S. economy continues to recover. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Mastercard has been partnering with several organizations and rolling out cost-effective solutions for tapping the current prospects in the global digital payments space. With consumer shift toward digital options likely to sustain even beyond the pandemic, the company continues to capitalize on the prevailing scenario by enhancing its capabilities and foraying further into the underserved areas through technological offerings.

For 2021, the Zacks Consensus Estimate for the company’s revenues and earnings suggests year-over-year growth of 19.8% and 20.5%, respectively.

In a year, shares of the company have gained 22.3% compared with the industry’s growth of 12.3%.

Zacks Investment ResearchImage Source: Zacks Investment Research

Visa consistently utilizes advanced technologies for rolling out newer payment solutions. The company has been striving hard to integrate the blockchain technology with its payments platform. For doing so, it has teamed up with several companies for exploring uses of the blockchain technology, which facilitates speedier transaction times and reduced fees. With a blockchain-based system, Visa holds immense potential to foray further into the digital currency space.

For 2021, the Zacks Consensus Estimate for the company’s revenues and earnings indicates year-over-year improvement of 7.2% and 10.9%, respectively.

Shares of the company have appreciated 21.7% in a year compared with the industry’s growth of 12.3%.

Zacks Investment ResearchImage Source: Zacks Investment Research

Global Payments Inc. (GPN - Free Report) has been partnering with several organizations for extending its nationwide reach in the digital payments space. The company’s recent collaboration with Google Cloud is a testament to this strategy. Notably, the deal aims to bolster the company’s Merchant business through streamlining of operations and curtailment of operating costs. Its tie-up with Amazon Web Services last year was intended to upgrade its core issuing platform for providing innovative payments solutions.

For 2021, the Zacks Consensus Estimate for the company’s revenues and earnings suggests year-over-year growth of 12.7% and 25.3%, respectively.

In a year, shares of the company have advanced 7.4% compared with the industry’s growth of 12.4%.

Zacks Investment ResearchImage Source: Zacks Investment Research

American Express Company (AXP - Free Report) has been making every effort to enhance its digital solutions suite for assisting businesses in regulating payments. The company has a proprietary automated accounts payable (AP) solution, American Express One AP. Need for securing payment processes via digitalization has been driving demand for automated AP solutions. The company has also tied forces with leading companies such as Discover Financial Services (DFS - Free Report) , Mastercard and Visa for offering enhanced checkout experience to consumers.

For 2021, the Zacks Consensus Estimate for the company’s revenues and earnings suggests year-over-year growth of 8.3% and 39.1%, respectively.

Shares of the company have climbed 59.5% in a year compared with the industry’s growth of 5.3%.

Zacks Investment ResearchImage Source: Zacks Investment Research

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