Back to top

Image: Bigstock

5 Big Winners From a Sharp Rise in Consumer Confidence

Read MoreHide Full Article

As the pace of inflation slowed down, consumers grew more optimistic about the U.S. economy. Anyhow, the labor market is still strong.

All these indicate that consumers’ outlays are poised to improve, which bodes well for consumer discretionary stocks like Marriott Vacations Worldwide Corporation (VAC - Free Report) , Marriott International, Inc. (MAR - Free Report) , BJ's Wholesale Club Holdings, Inc. (BJ - Free Report) , JAKKS Pacific, Inc. (JAKK - Free Report) and Enthusiast Gaming Holdings Inc. (EGLX - Free Report) .

US Consumer Confidence Jumps

Consumer confidence in the United States has taken a beating for the most part of the year amid high inflation that has contributed to a slowdown in economic growth and prompted the Fed to implement an aggressive monetary policy.

However, with inflation showing signs of easing in July amid lower gasoline prices, consumer confidence improved considerably in August, indicating that Americans are feeling more confident about the economy. Notably, the average gas prices across the United States dropped below $4 a gallon in August for the first time since March.

Meanwhile, the Conference Board’s consumer confidence index increased to 103.2 last month from July’s downwardly revised reading of 95.3, its first increase in four months, and easily topped analysts’ expectations.

Additionally, consumers’ assessment of present business conditions as well as short-term economic outlook improved markedly in August. After all, the present situation index jumped to 145.4 in August from July’s reading of 139.7. Similarly, the expectations index advanced to 75.1 last month from 65.6 in July.  

Consumer Spending to Improve

Looking ahead, improved consumer confidence may certainly help boost spending. And with inflation showing signs of a slow but steady drop, households are undoubtedly expected to increase spending on discretionary products or services.

Lest we forget, the labor market continues to shine despite fears of a recession. Last month, employers added 315,000 new jobs, which followed gains in the month of June and July. Thus, with more jobs in hand and consumers feeling confident about their financial situation, they are expected to spend more on nonobligatory items.

Stocks Worth a Buy

We have, thus, highlighted five consumer discretionary stocks that are most likely to gain from solid consumer confidence.

These stocks carry a Zacks Rank #1 (Strong Buy) or 2 (Buy). The search was also narrowed down with a VGM Score of A or B. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three metrics. Such a score allows you to eliminate the negative aspects of stocks and select winners. You can see the complete list of today’s Zacks #1 Rank stocks here.

Marriot Vacations Worldwide is a leading global vacation company, offering vacation ownership, exchange, rental, resort and property management services. VAC currently has a Zacks Rank #1 and a VGM Score of A. The Zacks Consensus Estimate for its current-year earnings has moved up 1.1% over the past 60 days. VAC’s expected earnings growth rate for the current year is 131.4%.

Marriott International is a leading worldwide hospitality company. MAR currently has a Zacks Rank #2 and a VGM Score of B. The Zacks Consensus Estimate for its current-year earnings has moved up 8.4% over the past 60 days. MAR’s expected earnings growth rate for the current year is 102.8%.

BJ's Wholesale Club has emerged as one of the preferred destinations for shoppers when it comes to essentials and other items. BJ currently has a Zacks Rank #1 and a VGM Score of B. The Zacks Consensus Estimate for its current-year earnings has moved up 9.1% over the past 60 days. BJ’s expected earnings growth rate for the current year is 10.8%.

JAKKS Pacific is a multi-brand company that has been designing and marketing a broad range of toys and consumer products since 1995. JAKK currently has a Zacks Rank #1 and a VGM Score of A. The Zacks Consensus Estimate for its current-year earnings has moved up 73.9% over the past 60 days. JAKK’s expected earnings growth rate for the current year is 88%.

Enthusiast Gaming provides a gaming media platform principally in North America. EGLX currently has a Zacks Rank #2 and a VGM Score of B. The Zacks Consensus Estimate for its current-year earnings has moved up 7.4% over the past 60 days. EGLX’s expected earnings growth rate for the current year is 26.5%.

Published in