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Americans, at present, are feeling much more self-assured about their well-being and are unfazed by the Federal Reserve’s aggressive monetary measures to curb elevated inflation. Their outlook for family finances improved substantially, and a few are apprehensive about an impending recession.
This is because the consumer confidence index climbed to 109.7 in June from May’s revised reading of 102.5, and touched the highest level since January 2022, per the Conference Board. Consumers’ assessment of the present business and employment scenario also improved, with the present situation index coming in at 155.3 in June compared with 148.9 in May. The present situation index, in reality, hit the highest level in nearly two years.
The expectations index, which indicates how consumers feel about economic conditions in the forthcoming six-month period, increased to 79.3 in June from May’s reading of 71.5, its highest level this year. Moreover, consumers do feel that inflation will slow down soon, compelling the Fed to eventually pause rate hikes, and bolster the economy. Americans expect price pressures to increase by 6% next year, the lowest reading since the end of 2020, citing a MarketWatch article.
So, what drove consumer confidence? Household confidence was mainly determined by the current strength in the labor market that ebbed concerns about an economic slump. Hiring accelerated in May, with 339,000 new jobs being added to the economy, per the Labor Department. May’s hiring was robust, and job growth was positive for the 29th consecutive month.
At the same time, the jobless rate continues to hover below the coveted 4% mark, signifying that Americans are secure in their jobs. Average hourly earnings too improved by 0.3% in May after gaining 0.4% in April (read more: 5 Stocks to Gain From Stunning Jobs Growth in May).
With consumers gaining confidence amid wage growth and a lower unemployment level, household spending is set to improve. And with renewed strength in consumer spending, consumer discretionary companies are set to grow as the outlays play a vital role in shaping their revenues.
We have, thus, selected four consumer discretionary stocks that flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy). Such stocks also boast 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.
Hilton Grand Vacations (HGV - Free Report) is engaged in the hospitality business. Hilton Grand Vacations has a Zacks Rank #1 and a VGM Score of B.
The Zacks Consensus Estimate for HGV’s current-year earnings has moved up 4.5% over the past 60 days. The company’s expected earnings growth rate for the current year is 12.9%.
Royal Caribbean Cruises (RCL - Free Report) primarily serve the contemporary, premium and deluxe segments of the cruise vacation industry, which includes the budget and luxury segments. Royal Caribbean Cruises has a Zacks Rank #1 and a VGM Score of B.
The Zacks Consensus Estimate for RCL’s current-year earnings has moved up 46.1% over the past 60 days. The company’s expected earnings growth rate for the current year is 162.9%.
Cinemark (CNK - Free Report) is a leader in the motion picture exhibition industry. Cinemark has a Zacks Rank #2 and a VGM Score of B.
The Zacks Consensus Estimate for the company’s current-year earnings has moved up 102.4% over the past 60 days. CNK’s expected earnings growth rate for the current year is 137.6%.
OneSpaWorld (OSW - Free Report) is a provider and innovator in the fields of wellness, beauty, rejuvenation, and transformation on cruise ships and land. OneSpaWorld has a Zacks Rank #2 and a VGM Score of A.
The Zacks Consensus Estimate for OSW’s current-year earnings has moved up 12.8% over the past 60 days. The company’s expected earnings growth rate for the current year is 89.3%.
Shares of Hilton Grand Vacations, Royal Caribbean Cruises, Cinemark, and OneSpaWorld, by the way, have gained 16.6%, 105.2%, 83.1%, and 20.5%, respectively, so far this year.
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4 Big Gainers on Soaring Consumer Confidence
Americans, at present, are feeling much more self-assured about their well-being and are unfazed by the Federal Reserve’s aggressive monetary measures to curb elevated inflation. Their outlook for family finances improved substantially, and a few are apprehensive about an impending recession.
This is because the consumer confidence index climbed to 109.7 in June from May’s revised reading of 102.5, and touched the highest level since January 2022, per the Conference Board. Consumers’ assessment of the present business and employment scenario also improved, with the present situation index coming in at 155.3 in June compared with 148.9 in May. The present situation index, in reality, hit the highest level in nearly two years.
The expectations index, which indicates how consumers feel about economic conditions in the forthcoming six-month period, increased to 79.3 in June from May’s reading of 71.5, its highest level this year. Moreover, consumers do feel that inflation will slow down soon, compelling the Fed to eventually pause rate hikes, and bolster the economy. Americans expect price pressures to increase by 6% next year, the lowest reading since the end of 2020, citing a MarketWatch article.
So, what drove consumer confidence? Household confidence was mainly determined by the current strength in the labor market that ebbed concerns about an economic slump. Hiring accelerated in May, with 339,000 new jobs being added to the economy, per the Labor Department. May’s hiring was robust, and job growth was positive for the 29th consecutive month.
At the same time, the jobless rate continues to hover below the coveted 4% mark, signifying that Americans are secure in their jobs. Average hourly earnings too improved by 0.3% in May after gaining 0.4% in April (read more: 5 Stocks to Gain From Stunning Jobs Growth in May).
With consumers gaining confidence amid wage growth and a lower unemployment level, household spending is set to improve. And with renewed strength in consumer spending, consumer discretionary companies are set to grow as the outlays play a vital role in shaping their revenues.
We have, thus, selected four consumer discretionary stocks that flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy). Such stocks also boast 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.
Hilton Grand Vacations (HGV - Free Report) is engaged in the hospitality business. Hilton Grand Vacations has a Zacks Rank #1 and a VGM Score of B.
The Zacks Consensus Estimate for HGV’s current-year earnings has moved up 4.5% over the past 60 days. The company’s expected earnings growth rate for the current year is 12.9%.
Royal Caribbean Cruises (RCL - Free Report) primarily serve the contemporary, premium and deluxe segments of the cruise vacation industry, which includes the budget and luxury segments. Royal Caribbean Cruises has a Zacks Rank #1 and a VGM Score of B.
The Zacks Consensus Estimate for RCL’s current-year earnings has moved up 46.1% over the past 60 days. The company’s expected earnings growth rate for the current year is 162.9%.
Cinemark (CNK - Free Report) is a leader in the motion picture exhibition industry. Cinemark has a Zacks Rank #2 and a VGM Score of B.
The Zacks Consensus Estimate for the company’s current-year earnings has moved up 102.4% over the past 60 days. CNK’s expected earnings growth rate for the current year is 137.6%.
OneSpaWorld (OSW - Free Report) is a provider and innovator in the fields of wellness, beauty, rejuvenation, and transformation on cruise ships and land. OneSpaWorld has a Zacks Rank #2 and a VGM Score of A.
The Zacks Consensus Estimate for OSW’s current-year earnings has moved up 12.8% over the past 60 days. The company’s expected earnings growth rate for the current year is 89.3%.
Shares of Hilton Grand Vacations, Royal Caribbean Cruises, Cinemark, and OneSpaWorld, by the way, have gained 16.6%, 105.2%, 83.1%, and 20.5%, respectively, so far this year.
Image Source: Zacks Investment Research