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5 Consumer Discretionary Stocks to Buy Ahead of Q1 Earnings
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The first-quarter 2023 earnings season has gained momentum. This is the first big week of this reporting cycle as more than 1,000 companies are slated to announce their financial numbers.
Several big techs aside from corporate giants of other sectors will report earnings this week. Below, we have focused on five consumer discretionary stocks with a favorable Zacks Rank that are set to report earnings results in the coming days.
Better-Than-Expected Start to Q1 Earnings
As of Apr 24, 90 companies on the S&P 500 Index have reported their quarterly financial numbers. Total earnings of these companies are down 1.9% year over year on 7.1% higher revenues. Further, 77.8% of companies have surpassed earnings estimates while 66.7% have surpassed revenue estimates.
Our projection has shown that total earnings of the S&P 500 Index are set to decline 8.3% year over year on 2.2% higher revenues compared with a 10% year-over-year decline in earnings on 1.7% higher revenues, estimated at the beginning of the reporting cycle. This will follow a 5.4% year-over-year decline in earnings of the S&P 500 Index on 5.9% higher revenues in fourth-quarter 2022.
This earnings season is likely to witness the fifth consecutive quarter of a year-over-year decline in net margins of the S&P 500 Index. The aggregate net margin is likely to decline 1.47% in the first quarter. If this happens, it will mark the biggest quarterly decline since the 1.38% year-over-year net margin decline in fourth-quarter 2022.
Consumer Discretionary Sector in Q1 At a Glance
Last quarter was an impressive one for the consumer discretionary sector. This is generally recognized as a growth-oriented sector. Notably, growth sectors are highly sensitive to the movement of market interest rate and are inversely related.
The consumer discretionary sector suffered a big blow in 2022 as the Fed pursued an aggressive interest rate hike and tighter monetary control policy in order 40-year high inflation. However, the magnitude of rate hike has reduced to a big extent in 2023 as the inflation rate has declined steadily from its peak on June 2022.
Moreover, in his March FOMC meeting statement, Fed Chairman Jerome Powell said that the rate hike cycle is approaching its end. Consequently, a growth sector like consumer discretionary has regained its lost glory. In first-quarter 2023, the Consumer Discretionary Select Sector SPDR (XLY) — one of the 11 broad-sector ETFs of the S&P 500 Index — rallied 16.1%.
Our Top Picks
We have narrowed our search to five consumer discretionary stocks that are set to report first-quarter 2023 earnings results. Each of these stocks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy) and has a positive Earnings ESP. You can see the complete list of today’s Zacks #1 Rank stocks here.
Our research shows that for stocks with the combination of a Zacks Rank #3 (Hold) or better and a positive Earnings ESP, the chance of an earnings beat is as high as 70%. These stocks are anticipated to appreciate after their earnings releases. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
The chart below shows the price performance of our five picks in the last quarter.
Image Source: Zacks Investment Research
Churchill Downs Inc. (CHDN - Free Report) operates as a racing, online wagering and gaming entertainment company in the United States. CHDN operates through three segments: Churchill Downs, Online Wagering, and Gaming. The world's most legendary racetrack, has conducted Thoroughbred racing and presented America's greatest race, the Kentucky Derby.
Zacks Rank #2 Churchill Downs has an Earnings ESP of +0.22%. It has an expected earnings growth rate of 34.9% for the current year. The Zacks Consensus Estimate for current-year earnings improved 5.3% over the last 90 days.
Churchill Downs recorded earnings surprises in three out of the last four reported quarters, with an average beat of 4.7%. CHDN is set to release earnings results on Apr 26, after the closing bell.
Crocs Inc. (CROX - Free Report) designs, develops, manufactures, markets and distributes casual lifestyle footwear and accessories for men, women and children worldwide. Solid consumer demand, as well as broad-based growth across all markets, channels and categories, contributed to the strong quarterly results of CROX.
Clogs, sandals and Jibbitz remained the key growth drivers. Crocs’ focus on product innovation and marketing, digital capabilities, and potential gains from the HEYDUDE buyout bode well. Increased focus on the Crocs mobile app and global social platforms have aided digital sales.
Zacks Rank #2 Crocs has an Earnings ESP of +2.37%. It has an expected earnings growth rate of 3.3% for the current year. The Zacks Consensus Estimate for current-year earnings improved 0.8% over the last seven days.
Crocs recorded earnings surprises in the last four reported quarters, with an average beat of 21.8%. CROX is set to release earnings results on Apr 27, before the opening bell.
Marriott International Inc. (MAR - Free Report) is gaining from the reopening of international borders and leniency in travel restrictions. Several countries are gradually removing travel restrictions. MAR is consistently expanding its worldwide presence and capitalizing on the demand for hotels in international markets.
Zacks Rank #2 Marriott International has an Earnings ESP of +3.04%. It has an expected earnings growth rate of 16% for the current year. The Zacks Consensus Estimate for current-year earnings improved 0.1% over the last 30 days.
MAR recorded earnings surprises in the last four reported quarters, with an average beat of 12.8%. MAR is set to release earnings results on May 2, before the opening bell.
Acushnet Holdings Corp. (GOLF - Free Report) designs, develops, manufactures, and distributes golf products n the United States, Europe, the Middle East, Africa, Japan, Korea, and internationally. GOLF’s operating segment consists of Titleist Golf Balls, Titleist Golf Clubs, Titleist Golf Gear and FootJoy Golf Wear.
Zacks Rank #2 Acushnet Holdings has an Earnings ESP of +2.75%. It has an expected earnings growth rate of 3.6% for the current year. The Zacks Consensus Estimate for current-year earnings improved 0.4% over the last seven days.
GOLF recorded earnings surprises in the last four reported quarters, with an average beat of 46.9%. GOLF is set to release earnings results on May 4, before the opening bell.
Six Flags Entertainment Corp. (SIX - Free Report) owns and operates regional parks. SIX has theme, water and zoological parks offering rides, water attractions, concerts, shows, restaurants, game venues and retail outlets. SIX holds long-term licenses for theme park usage throughout the United States (except the Las Vegas metropolitan area), Canada, Mexico and other countries.
Zacks Rank #1 Six Flags Entertainment has an Earnings ESP of +1.86%. It has an expected earnings growth rate of 34.8% for the current year. The Zacks Consensus Estimate for current-year earnings improved 13% over the last 60 days.
Six Flags Entertainment recorded earnings surprises in two out of the last four reported quarters, with an average beat of 5.7%. SIX is set to release earnings results on May 8, before the opening bell.
Image: Bigstock
5 Consumer Discretionary Stocks to Buy Ahead of Q1 Earnings
The first-quarter 2023 earnings season has gained momentum. This is the first big week of this reporting cycle as more than 1,000 companies are slated to announce their financial numbers.
Several big techs aside from corporate giants of other sectors will report earnings this week. Below, we have focused on five consumer discretionary stocks with a favorable Zacks Rank that are set to report earnings results in the coming days.
Better-Than-Expected Start to Q1 Earnings
As of Apr 24, 90 companies on the S&P 500 Index have reported their quarterly financial numbers. Total earnings of these companies are down 1.9% year over year on 7.1% higher revenues. Further, 77.8% of companies have surpassed earnings estimates while 66.7% have surpassed revenue estimates.
Our projection has shown that total earnings of the S&P 500 Index are set to decline 8.3% year over year on 2.2% higher revenues compared with a 10% year-over-year decline in earnings on 1.7% higher revenues, estimated at the beginning of the reporting cycle. This will follow a 5.4% year-over-year decline in earnings of the S&P 500 Index on 5.9% higher revenues in fourth-quarter 2022.
This earnings season is likely to witness the fifth consecutive quarter of a year-over-year decline in net margins of the S&P 500 Index. The aggregate net margin is likely to decline 1.47% in the first quarter. If this happens, it will mark the biggest quarterly decline since the 1.38% year-over-year net margin decline in fourth-quarter 2022.
Consumer Discretionary Sector in Q1 At a Glance
Last quarter was an impressive one for the consumer discretionary sector. This is generally recognized as a growth-oriented sector. Notably, growth sectors are highly sensitive to the movement of market interest rate and are inversely related.
The consumer discretionary sector suffered a big blow in 2022 as the Fed pursued an aggressive interest rate hike and tighter monetary control policy in order 40-year high inflation. However, the magnitude of rate hike has reduced to a big extent in 2023 as the inflation rate has declined steadily from its peak on June 2022.
Moreover, in his March FOMC meeting statement, Fed Chairman Jerome Powell said that the rate hike cycle is approaching its end. Consequently, a growth sector like consumer discretionary has regained its lost glory. In first-quarter 2023, the Consumer Discretionary Select Sector SPDR (XLY) — one of the 11 broad-sector ETFs of the S&P 500 Index — rallied 16.1%.
Our Top Picks
We have narrowed our search to five consumer discretionary stocks that are set to report first-quarter 2023 earnings results. Each of these stocks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy) and has a positive Earnings ESP. You can see the complete list of today’s Zacks #1 Rank stocks here.
Our research shows that for stocks with the combination of a Zacks Rank #3 (Hold) or better and a positive Earnings ESP, the chance of an earnings beat is as high as 70%. These stocks are anticipated to appreciate after their earnings releases. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
The chart below shows the price performance of our five picks in the last quarter.
Image Source: Zacks Investment Research
Churchill Downs Inc. (CHDN - Free Report) operates as a racing, online wagering and gaming entertainment company in the United States. CHDN operates through three segments: Churchill Downs, Online Wagering, and Gaming. The world's most legendary racetrack, has conducted Thoroughbred racing and presented America's greatest race, the Kentucky Derby.
Zacks Rank #2 Churchill Downs has an Earnings ESP of +0.22%. It has an expected earnings growth rate of 34.9% for the current year. The Zacks Consensus Estimate for current-year earnings improved 5.3% over the last 90 days.
Churchill Downs recorded earnings surprises in three out of the last four reported quarters, with an average beat of 4.7%. CHDN is set to release earnings results on Apr 26, after the closing bell.
Crocs Inc. (CROX - Free Report) designs, develops, manufactures, markets and distributes casual lifestyle footwear and accessories for men, women and children worldwide. Solid consumer demand, as well as broad-based growth across all markets, channels and categories, contributed to the strong quarterly results of CROX.
Clogs, sandals and Jibbitz remained the key growth drivers. Crocs’ focus on product innovation and marketing, digital capabilities, and potential gains from the HEYDUDE buyout bode well. Increased focus on the Crocs mobile app and global social platforms have aided digital sales.
Zacks Rank #2 Crocs has an Earnings ESP of +2.37%. It has an expected earnings growth rate of 3.3% for the current year. The Zacks Consensus Estimate for current-year earnings improved 0.8% over the last seven days.
Crocs recorded earnings surprises in the last four reported quarters, with an average beat of 21.8%. CROX is set to release earnings results on Apr 27, before the opening bell.
Marriott International Inc. (MAR - Free Report) is gaining from the reopening of international borders and leniency in travel restrictions. Several countries are gradually removing travel restrictions. MAR is consistently expanding its worldwide presence and capitalizing on the demand for hotels in international markets.
Zacks Rank #2 Marriott International has an Earnings ESP of +3.04%. It has an expected earnings growth rate of 16% for the current year. The Zacks Consensus Estimate for current-year earnings improved 0.1% over the last 30 days.
MAR recorded earnings surprises in the last four reported quarters, with an average beat of 12.8%. MAR is set to release earnings results on May 2, before the opening bell.
Acushnet Holdings Corp. (GOLF - Free Report) designs, develops, manufactures, and distributes golf products n the United States, Europe, the Middle East, Africa, Japan, Korea, and internationally. GOLF’s operating segment consists of Titleist Golf Balls, Titleist Golf Clubs, Titleist Golf Gear and FootJoy Golf Wear.
Zacks Rank #2 Acushnet Holdings has an Earnings ESP of +2.75%. It has an expected earnings growth rate of 3.6% for the current year. The Zacks Consensus Estimate for current-year earnings improved 0.4% over the last seven days.
GOLF recorded earnings surprises in the last four reported quarters, with an average beat of 46.9%. GOLF is set to release earnings results on May 4, before the opening bell.
Six Flags Entertainment Corp. (SIX - Free Report) owns and operates regional parks. SIX has theme, water and zoological parks offering rides, water attractions, concerts, shows, restaurants, game venues and retail outlets. SIX holds long-term licenses for theme park usage throughout the United States (except the Las Vegas metropolitan area), Canada, Mexico and other countries.
Zacks Rank #1 Six Flags Entertainment has an Earnings ESP of +1.86%. It has an expected earnings growth rate of 34.8% for the current year. The Zacks Consensus Estimate for current-year earnings improved 13% over the last 60 days.
Six Flags Entertainment recorded earnings surprises in two out of the last four reported quarters, with an average beat of 5.7%. SIX is set to release earnings results on May 8, before the opening bell.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.