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Zacks Industry Outlook Highlights Traeger, Alto Ingredients, The RealReal and Lifetime Brands
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For Immediate Release
Chicago, IL – July 11, 2023 – Today, Zacks Equity Research discusses Traeger, Inc. (COOK - Free Report) , Alto Ingredients, Inc. (ALTO - Free Report) , The RealReal, Inc. (REAL - Free Report) and Lifetime Brands, Inc. (LCUT - Free Report) .
Inflation and recession fears seem to have taken a backseat for the time being with gains in jobs and wages lately. With more money in their pockets, consumers are likely to engage in discretionary spending, leading to increased sales and profitability for companies operating in the Zacks Consumer Products-Discretionary industry.
Meanwhile, the industry participants have been focusing on a superior product strategy, the advancement of omnichannel capabilities and prudent capital investments to strike the right chord with consumers. Backed by these initiatives, companies like Traeger, Inc., Alto Ingredients, Inc., TheRealReal, Inc. and Lifetime Brands, Inc. are set to cash in on the opportunities.
About the Industry
The Consumer Products-Discretionary industry has a direct correlation with the economy, thus making it cyclical. Discretionary products command high prices, with middle-to-higher-income groups being targeted customers. The industry comprises companies that offer product categories, including fashion, jewelry and watches, and other home and art products.
Quite a few players develop, manufacture, market and sell over-the-counter health and personal care products. Some even manufacture and distribute party goods. There are companies that design, source and distribute licensed pop culture products too. Some industry participants also produce and distribute various products for the lawn and garden and pet supplies markets. Companies sell products to specialty retailers, mass-market retailers and e-commerce sites.
3 Key Trends to Watch in the Industry
Consumers' Willingness to Spend: The performance of the industry is closely tied to consumers' purchasing power. As Americans demonstrate increased confidence in the U.S. economy, it is expected to have a positive impact on consumer spending. U.S. consumer confidence, a crucial indicator of economic health, experienced a significant improvement in June, reaching its highest level since January 2022.
The Consumer Confidence Index, according to the Conference Board, surged to 109.7, marking a significant increase from May's reading of 102.5. Per the Labor Department, nonfarm payrolls rose 209,000 in June, while the unemployment rate was 3.6%. We note that average hourly earnings increased 0.4% in June, while the same rose 4.4% on an annual basis. Additionally, industry participants have been actively focusing on strengthening consumer relationships and enhancing digital and data analytics capabilities to meet evolving consumer demands.
Brand Enhancement, Capital Discipline: Industry participants have been focusing on deepening engagements with consumers, creating innovative and compelling products and enhancing digital and data analytics capabilities. The launch of newer styles, customization options, unique packaging, point-of-sale displays, automation and high-end customer service enables them to woo consumers.
Efforts to enhance the brand portfolio via marketing strategies, buyouts, innovations and alliances are likely to keep supporting players in the space. The companies have been taking steps to strengthen their financial position. They have been making every move, from managing the inventory to optimizing capital expenditures and enhancing operational efficiency.
Margins an Area to Watch: The industry is quite fragmented, with companies vying for a bigger slice of the pie on attributes, such as price, products and speed to market. To address these, a significant number of players in the industry have been investing in strengthening their digital ecosystem. While these endeavors provide an edge, they entail high costs.
Apart from these, higher marketing, advertising and other operational expenses might compress margins. Of late, the industry participants have been dealing with product cost inflation. Nonetheless, companies have been focusing on undertaking initiatives to mitigate cost-related challenges. These include streamlining operational structures, optimizing supply networks and adopting effective pricing policies.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Consumer Products-Discretionary industry is a group within the broader Consumer Discretionary sector. The industry currently carries a Zacks Industry Rank #106, which places it in the top 42% of more than 250 Zacks industries.
The group's Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates encouraging near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
The industry's position in the top 50% of the Zacks-ranked industries is a result of a positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gaining confidence in this group's earnings growth potential. Since the beginning of April 2023, the industry's bottom-line estimate for the current financial year has risen to earnings of 63 cents from a loss of 12 cents.
Before we present a few stocks that you may want to consider for your portfolio, let's take a look at the industry's recent stock-market performance and valuation picture.
Industry Versus Broader Market
The Zacks Consumer Products-Discretionary industry has underperformed the broader Zacks Consumer Discretionary sector and the Zacks S&P 500 composite over the past year.
The industry has declined 8% over this period against the S&P 500's rise of 13.9%. Meanwhile, the broader sector has increased 10.9%.
Industry's Current Valuation
On the basis of forward 12-month price-to-sales (P/S), which is commonly used for valuing consumer discretionary stocks, the industry is currently trading at 0.30X compared with the S&P 500's 3.74X and the sector's 1.58X.
Over the last three years, the industry has traded as high as 12.38X and as low as 0.30X, with the median being at 3.61X.
4 Stocks to Watch
Lifetime Brands: This leading global designer, developer and marketer of a broad range of branded consumer products used in the home continues to navigate the tough operating environment through a comprehensive array of strategies. These encompass balance sheet management, cost-containment measures, disciplined investment decisions and targeted restructuring initiatives.
Impressively, Lifetime Brands has an estimated long-term earnings growth rate of 14%. The Zacks Consensus Estimate for current financial-year earnings suggests growth of 93.6% from the year-ago reported figure. Lifetime Brands delivered an earnings surprise of 40% in the last reported quarter. Shares of this Zacks Rank #1 (Strong Buy) company have decreased 44.6% in the past year. You can see the complete list of today's Zacks #1 Rank stocks here.
Alto Ingredients: This producer and marketer of specialty alcohols and essential ingredients continues to make notable progress in transformative capital initiatives aimed at achieving EBITDA expansion objectives. The company intends to achieve approximately $65 million of additional annualized EBITDA by the end of 2025, with the expected target to elevate it to $125 million annualized EBITDA by the conclusion of 2026.
Alto Ingredients delivered an earnings surprise of 10.5% in the last reported quarter. The Zacks Consensus Estimate for ALTO's current financial-year bottom line suggests growth of 78.3% from the year-ago period. We note that shares of this Zacks Rank #2 (Buy) company have declined 12.2% in the past year.
The RealReal: This San Francisco, CA-based company is the world's largest online marketplace for authenticated, resale luxury goods. The RealReal is focusing on enhancing profitability through price optimization, cost containment, the tapping of potential revenue streams and concentration on the higher-margin consignment business.
The RealReal has a trailing four-quarter earnings surprise of 10.4%, on average. It has an estimated long-term earnings growth rate of 33.8%. The Zacks Consensus Estimate for the current financial-year bottom line suggests growth of 26.1% from the year-ago reported figure. Shares of this Zacks Rank #2 company have decreased 14.2% in the past year.
Traeger: This creator and category leader of wood pellet grills should benefit from proactive measures undertaken to drive profitability and financial flexibility amid tough macroeconomic conditions. These include product innovation, cost-containment initiatives and inventory rationalization. Management foresees a gross margin between 36% and 37% for fiscal 2023.
Traeger has a trailing four-quarter earnings surprise of 35.3%, on average. The Zacks Consensus Estimate for the current financial-year bottom line suggests growth of 33.3% from the year-ago reported figure. Shares of this Zacks Rank #3 (Hold) company have declined 7% in the past year.
Why Haven't You Looked at Zacks' Top Stocks?
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Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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Zacks Industry Outlook Highlights Traeger, Alto Ingredients, The RealReal and Lifetime Brands
For Immediate Release
Chicago, IL – July 11, 2023 – Today, Zacks Equity Research discusses Traeger, Inc. (COOK - Free Report) , Alto Ingredients, Inc. (ALTO - Free Report) , The RealReal, Inc. (REAL - Free Report) and Lifetime Brands, Inc. (LCUT - Free Report) .
Industry: Consumer Discretionary
Link: https://www.zacks.com/commentary/2118668/4-consumer-products-discretionary-stocks-to-tap-amid-improving-industry-trends
Inflation and recession fears seem to have taken a backseat for the time being with gains in jobs and wages lately. With more money in their pockets, consumers are likely to engage in discretionary spending, leading to increased sales and profitability for companies operating in the Zacks Consumer Products-Discretionary industry.
Meanwhile, the industry participants have been focusing on a superior product strategy, the advancement of omnichannel capabilities and prudent capital investments to strike the right chord with consumers. Backed by these initiatives, companies like Traeger, Inc., Alto Ingredients, Inc., The RealReal, Inc. and Lifetime Brands, Inc. are set to cash in on the opportunities.
About the Industry
The Consumer Products-Discretionary industry has a direct correlation with the economy, thus making it cyclical. Discretionary products command high prices, with middle-to-higher-income groups being targeted customers. The industry comprises companies that offer product categories, including fashion, jewelry and watches, and other home and art products.
Quite a few players develop, manufacture, market and sell over-the-counter health and personal care products. Some even manufacture and distribute party goods. There are companies that design, source and distribute licensed pop culture products too. Some industry participants also produce and distribute various products for the lawn and garden and pet supplies markets. Companies sell products to specialty retailers, mass-market retailers and e-commerce sites.
3 Key Trends to Watch in the Industry
Consumers' Willingness to Spend: The performance of the industry is closely tied to consumers' purchasing power. As Americans demonstrate increased confidence in the U.S. economy, it is expected to have a positive impact on consumer spending. U.S. consumer confidence, a crucial indicator of economic health, experienced a significant improvement in June, reaching its highest level since January 2022.
The Consumer Confidence Index, according to the Conference Board, surged to 109.7, marking a significant increase from May's reading of 102.5. Per the Labor Department, nonfarm payrolls rose 209,000 in June, while the unemployment rate was 3.6%. We note that average hourly earnings increased 0.4% in June, while the same rose 4.4% on an annual basis. Additionally, industry participants have been actively focusing on strengthening consumer relationships and enhancing digital and data analytics capabilities to meet evolving consumer demands.
Brand Enhancement, Capital Discipline: Industry participants have been focusing on deepening engagements with consumers, creating innovative and compelling products and enhancing digital and data analytics capabilities. The launch of newer styles, customization options, unique packaging, point-of-sale displays, automation and high-end customer service enables them to woo consumers.
Efforts to enhance the brand portfolio via marketing strategies, buyouts, innovations and alliances are likely to keep supporting players in the space. The companies have been taking steps to strengthen their financial position. They have been making every move, from managing the inventory to optimizing capital expenditures and enhancing operational efficiency.
Margins an Area to Watch: The industry is quite fragmented, with companies vying for a bigger slice of the pie on attributes, such as price, products and speed to market. To address these, a significant number of players in the industry have been investing in strengthening their digital ecosystem. While these endeavors provide an edge, they entail high costs.
Apart from these, higher marketing, advertising and other operational expenses might compress margins. Of late, the industry participants have been dealing with product cost inflation. Nonetheless, companies have been focusing on undertaking initiatives to mitigate cost-related challenges. These include streamlining operational structures, optimizing supply networks and adopting effective pricing policies.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Consumer Products-Discretionary industry is a group within the broader Consumer Discretionary sector. The industry currently carries a Zacks Industry Rank #106, which places it in the top 42% of more than 250 Zacks industries.
The group's Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates encouraging near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
The industry's position in the top 50% of the Zacks-ranked industries is a result of a positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gaining confidence in this group's earnings growth potential. Since the beginning of April 2023, the industry's bottom-line estimate for the current financial year has risen to earnings of 63 cents from a loss of 12 cents.
Before we present a few stocks that you may want to consider for your portfolio, let's take a look at the industry's recent stock-market performance and valuation picture.
Industry Versus Broader Market
The Zacks Consumer Products-Discretionary industry has underperformed the broader Zacks Consumer Discretionary sector and the Zacks S&P 500 composite over the past year.
The industry has declined 8% over this period against the S&P 500's rise of 13.9%. Meanwhile, the broader sector has increased 10.9%.
Industry's Current Valuation
On the basis of forward 12-month price-to-sales (P/S), which is commonly used for valuing consumer discretionary stocks, the industry is currently trading at 0.30X compared with the S&P 500's 3.74X and the sector's 1.58X.
Over the last three years, the industry has traded as high as 12.38X and as low as 0.30X, with the median being at 3.61X.
4 Stocks to Watch
Lifetime Brands: This leading global designer, developer and marketer of a broad range of branded consumer products used in the home continues to navigate the tough operating environment through a comprehensive array of strategies. These encompass balance sheet management, cost-containment measures, disciplined investment decisions and targeted restructuring initiatives.
Impressively, Lifetime Brands has an estimated long-term earnings growth rate of 14%. The Zacks Consensus Estimate for current financial-year earnings suggests growth of 93.6% from the year-ago reported figure. Lifetime Brands delivered an earnings surprise of 40% in the last reported quarter. Shares of this Zacks Rank #1 (Strong Buy) company have decreased 44.6% in the past year. You can see the complete list of today's Zacks #1 Rank stocks here.
Alto Ingredients: This producer and marketer of specialty alcohols and essential ingredients continues to make notable progress in transformative capital initiatives aimed at achieving EBITDA expansion objectives. The company intends to achieve approximately $65 million of additional annualized EBITDA by the end of 2025, with the expected target to elevate it to $125 million annualized EBITDA by the conclusion of 2026.
Alto Ingredients delivered an earnings surprise of 10.5% in the last reported quarter. The Zacks Consensus Estimate for ALTO's current financial-year bottom line suggests growth of 78.3% from the year-ago period. We note that shares of this Zacks Rank #2 (Buy) company have declined 12.2% in the past year.
The RealReal: This San Francisco, CA-based company is the world's largest online marketplace for authenticated, resale luxury goods. The RealReal is focusing on enhancing profitability through price optimization, cost containment, the tapping of potential revenue streams and concentration on the higher-margin consignment business.
The RealReal has a trailing four-quarter earnings surprise of 10.4%, on average. It has an estimated long-term earnings growth rate of 33.8%. The Zacks Consensus Estimate for the current financial-year bottom line suggests growth of 26.1% from the year-ago reported figure. Shares of this Zacks Rank #2 company have decreased 14.2% in the past year.
Traeger: This creator and category leader of wood pellet grills should benefit from proactive measures undertaken to drive profitability and financial flexibility amid tough macroeconomic conditions. These include product innovation, cost-containment initiatives and inventory rationalization. Management foresees a gross margin between 36% and 37% for fiscal 2023.
Traeger has a trailing four-quarter earnings surprise of 35.3%, on average. The Zacks Consensus Estimate for the current financial-year bottom line suggests growth of 33.3% from the year-ago reported figure. Shares of this Zacks Rank #3 (Hold) company have declined 7% in the past year.
Why Haven't You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +6.2 average gain per year. Amazingly, they soared with average gains of +46.4%, +49.5% and +55.2% per year. Today you can access their live picks without cost or obligation.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.