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Top 5 Consumer Discretionary Stocks With More Upside Left
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The U.S. stock market rally for the past month has halted in the last couple of trading sessions. Market participants are currently divided on whether the rally can resume in the near future or whether Wall Street will again witness rangebound trading. The Fed Chairman testified before the U.S. Congress that bringing down inflation to a controllable level is a long way to go, and more interest rate hikes are likely by the end of this year.
The consumer discretionary sector has flourished so far in 2023. This sector is generally recognized as being growth-oriented. 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 to control the 40-year high inflation. However, the magnitude of rate hike has reduced to quite an extent in 2023 as the inflation rate has declined steadily from its peak in June 2022. Moreover, in the June FOMC meeting, the Fed paused rate hike after 10 consecutive increases.
Year to date, the Consumer Discretionary Select Sector SPDR (XLY) — one of the 11 broad-sector ETFs of the S&P 500 Index — has rallied 28%. Despite more rate hike threats, a handful of consumer discretionary stocks look promising at this stage.
Our Top Picks
We have narrowed our search to five consumer discretionary stocks that have solid potential for the rest of 2023. These stocks have seen positive earnings estimate revisions in the last 60 days. Each of our picks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performance of our five picks year to date.
Image Source: Zacks Investment Research
Marriott International Inc. (MAR - Free Report) is benefiting from its focus on expansion initiatives, digital innovation, and loyalty program. MAR is also gaining from reopening international borders and leniency in travel restrictions, which have resulted in solid leisure demand along with business and cross-border travel improvements. MAR is consistently trying to expand its worldwide presence and capitalize on the demand for hotels in international markets.
Zacks Rank #2 Marriott International has an expected revenue and earnings growth rate of 12.9% and 25.4%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 8.1% over the last 60 days.
Royal Caribbean Cruises Ltd. (RCL - Free Report) has been benefiting from strong close-in bookings at higher prices and continued strength of onboard spending driving load factors. Considering the extension of the WAVE season and solid pent-up demand, RCL raised its 2023 guidance. RCL expects adjusted EPS to be $4.40-$4.80, up from the previously stated $3-$3.60.
Zacks Rank #1 Royal Caribbean Cruises has an expected revenue and earnings growth rate of 48.5% and more than 100%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 22% over the last 30 days.
Lululemon Athletica Inc. (LULU - Free Report) delivered the 11th straight quarter of earnings surprise in fourth-quarter fiscal 2022, while sales beat estimates for the fourth straight quarter. The top and bottom-line also grew year over year on continued business momentum. Moreover, earnings and revenues outpaced our estimate in the quarter.
Comps growth was aided by robust traffic trends in both stores and e-commerce. On a three-year CAGR basis, traffic was up 7% in stores and more than 45% in e-commerce. LULU is capitalizing on the importance of physical retail and the convenience of online engagement.
Zacks Rank #2 LULU has an expected revenue and earnings growth rate of 17% and 18.3%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.2% over the last seven days.
DraftKings Inc. (DKNG - Free Report) is a digital sports entertainment and gaming company offering the competitive spirits of sports fans with products that range across daily fantasy, regulated gaming and digital media. DKNG is the only U.S.-based vertically integrated sports betting operator.
DKNG is a multi-channel provider of sports betting and gaming technologies, powering sports and gaming entertainment for 50 operators across more than 15 regulated U.S. and global markets.
Zacks Rank #2 DraftKings has an expected revenue and earnings growth rate of 43% and 40.8%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.5% over the last seven days.
Snap-on Inc. (SNA - Free Report) has been benefiting from positive business momentum and gains from its Value Creation plan. SNA is on track with its Rapid Continuous Improvement process and other cost-reduction initiatives. Cost-reduction plans, including the RCI program, designed to enhance organizational effectiveness and minimize costs, bode well. Higher sales volume and gains from RCI initiatives have led to the margin expansion of SNA.
Zacks Rank #2 Snap-on has an expected revenue and earnings growth rate of 4.5% and 5.5%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.6% over the last 60 days.
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Top 5 Consumer Discretionary Stocks With More Upside Left
The U.S. stock market rally for the past month has halted in the last couple of trading sessions. Market participants are currently divided on whether the rally can resume in the near future or whether Wall Street will again witness rangebound trading. The Fed Chairman testified before the U.S. Congress that bringing down inflation to a controllable level is a long way to go, and more interest rate hikes are likely by the end of this year.
The consumer discretionary sector has flourished so far in 2023. This sector is generally recognized as being growth-oriented. 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 to control the 40-year high inflation. However, the magnitude of rate hike has reduced to quite an extent in 2023 as the inflation rate has declined steadily from its peak in June 2022. Moreover, in the June FOMC meeting, the Fed paused rate hike after 10 consecutive increases.
Year to date, the Consumer Discretionary Select Sector SPDR (XLY) — one of the 11 broad-sector ETFs of the S&P 500 Index — has rallied 28%. Despite more rate hike threats, a handful of consumer discretionary stocks look promising at this stage.
Our Top Picks
We have narrowed our search to five consumer discretionary stocks that have solid potential for the rest of 2023. These stocks have seen positive earnings estimate revisions in the last 60 days. Each of our picks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performance of our five picks year to date.
Image Source: Zacks Investment Research
Marriott International Inc. (MAR - Free Report) is benefiting from its focus on expansion initiatives, digital innovation, and loyalty program. MAR is also gaining from reopening international borders and leniency in travel restrictions, which have resulted in solid leisure demand along with business and cross-border travel improvements. MAR is consistently trying to expand its worldwide presence and capitalize on the demand for hotels in international markets.
Zacks Rank #2 Marriott International has an expected revenue and earnings growth rate of 12.9% and 25.4%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 8.1% over the last 60 days.
Royal Caribbean Cruises Ltd. (RCL - Free Report) has been benefiting from strong close-in bookings at higher prices and continued strength of onboard spending driving load factors. Considering the extension of the WAVE season and solid pent-up demand, RCL raised its 2023 guidance. RCL expects adjusted EPS to be $4.40-$4.80, up from the previously stated $3-$3.60.
Zacks Rank #1 Royal Caribbean Cruises has an expected revenue and earnings growth rate of 48.5% and more than 100%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 22% over the last 30 days.
Lululemon Athletica Inc. (LULU - Free Report) delivered the 11th straight quarter of earnings surprise in fourth-quarter fiscal 2022, while sales beat estimates for the fourth straight quarter. The top and bottom-line also grew year over year on continued business momentum. Moreover, earnings and revenues outpaced our estimate in the quarter.
Comps growth was aided by robust traffic trends in both stores and e-commerce. On a three-year CAGR basis, traffic was up 7% in stores and more than 45% in e-commerce. LULU is capitalizing on the importance of physical retail and the convenience of online engagement.
Zacks Rank #2 LULU has an expected revenue and earnings growth rate of 17% and 18.3%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.2% over the last seven days.
DraftKings Inc. (DKNG - Free Report) is a digital sports entertainment and gaming company offering the competitive spirits of sports fans with products that range across daily fantasy, regulated gaming and digital media. DKNG is the only U.S.-based vertically integrated sports betting operator.
DKNG is a multi-channel provider of sports betting and gaming technologies, powering sports and gaming entertainment for 50 operators across more than 15 regulated U.S. and global markets.
Zacks Rank #2 DraftKings has an expected revenue and earnings growth rate of 43% and 40.8%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.5% over the last seven days.
Snap-on Inc. (SNA - Free Report) has been benefiting from positive business momentum and gains from its Value Creation plan. SNA is on track with its Rapid Continuous Improvement process and other cost-reduction initiatives. Cost-reduction plans, including the RCI program, designed to enhance organizational effectiveness and minimize costs, bode well. Higher sales volume and gains from RCI initiatives have led to the margin expansion of SNA.
Zacks Rank #2 Snap-on has an expected revenue and earnings growth rate of 4.5% and 5.5%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.6% over the last 60 days.