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4 Retail Stocks to Play the Surge in Consumer Sentiment
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In a promising turn of events, January has seen a remarkable surge in U.S. consumer sentiment, reaching its highest level in two and a half years. The University of Michigan's recent report indicates an upswing in optimism. This surge in sentiment comes hand in hand with a decline in inflation expectations, signaling a potential shift in the economic landscape.
The University of Michigan's preliminary reading on the overall index of consumer sentiment for January stands at an impressive 78.8, the highest since July 2021 and a significant leap from December's 69.7. This unexpected positive turn is occurring against a backdrop of a robust stock market, a healthy job market and stable gasoline prices.
One of the key takeaways is the decline in consumers' inflation expectations for the next 12 months to 2.9%, the lowest level since December 2020. This shift in expectations, down from 3.1% in December, aligns with a range observed before the onset of the COVID-19 pandemic. The prospect of lower inflation is welcomed news for the Federal Reserve, potentially opening the door for interest rate cuts in the coming months.
This surge in confidence could play a pivotal role in allaying fears of an impending recession. Despite inflation and high interest rate concerns, Americans maintained a spending spree driven by strong employment and wage gains.
Investors, in light of these positive developments, should consider strategic opportunities in the market. Sectors that traditionally thrive in times of economic optimism, such as retail, may present compelling investment avenues. As inflation expectations ease and consumer sentiment continues to improve, astute investors may find opportunities to capitalize on a more positive economic outlook.
Past-Year Price Performance
Image Source: Zacks Investment Research
4 Prominent Picks
Casey's General Stores, Inc. (CASY - Free Report) is a potential pick. Casey's price and product optimization strategies, increased penetration of private brands and digital engagements comprising the mobile app and online ordering capabilities are commendable. As the third-largest convenience retailer and the fifth-largest pizza chain, its distinctive self-distribution model, robust Inside category performance and strategic acquisitions are noteworthy strengths.
The Zacks Consensus Estimate for Casey's current fiscal sales and EPS suggests growth of 0.3% and 9%, respectively, from the year-ago reported figure. This Zacks Rank #1 (Strong Buy) company has a trailing four-quarter earnings surprise of 17.8%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
Investors can count on Target Corporation (TGT - Free Report) . This Minneapolis, MN-based company has been making multiple changes to its business model to adapt and stay relevant in the dynamic retail landscape. Target has been deploying resources to enhance omnichannel capabilities, come up with new brands, refurbish stores and expand same-day delivery options to provide customers with a seamless shopping experience. These have been contributing to the top line.
The Zacks Consensus Estimate for Target’s current financial-year EPS suggests growth of 38.5% from the year-ago reported figure. TGT, which sports a Zacks Rank #1, has a trailing four-quarter earnings surprise of 30.8%, on average.
Amazon.com, Inc. (AMZN - Free Report) is worth considering. The company’s robust e-commerce platform, renowned for its vast product selection and efficient delivery services, continues to be a primary driver of revenue growth. Prime membership, a cornerstone of Amazon's success, not only fosters customer loyalty but also drives recurring revenues through subscription fees, offering members exclusive access to a myriad of services, such as expedited shipping.
The Zacks Consensus Estimate for Amazon’s current financial-year sales and EPS suggests growth of 11.1% and 278.9%, respectively, from the year-ago reported figure. AMZN, which sports a Zacks Rank #1, has a trailing four-quarter earnings surprise of 54.9%, on average.
American Eagle Outfitters, Inc. (AEO - Free Report) is worth betting on. The company’s efforts to rationalize inventory and contain costs are paying off. The strong performance of key brands like American Eagle and Aerie, coupled with expansions into premium and activewear segments, indicates potential for growth. Its store designs and online enhancements demonstrate a commitment to improving the customer experience.
The Zacks Consensus Estimate for American Eagle Outfitters’ current fiscal sales and EPS suggests growth of 5% and 43.3%, respectively, from the year-ago reported figure. AEO, which carries a Zacks Rank #2 (Buy), delivered a trailing four-quarter earnings surprise of 23%, on average.
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4 Retail Stocks to Play the Surge in Consumer Sentiment
In a promising turn of events, January has seen a remarkable surge in U.S. consumer sentiment, reaching its highest level in two and a half years. The University of Michigan's recent report indicates an upswing in optimism. This surge in sentiment comes hand in hand with a decline in inflation expectations, signaling a potential shift in the economic landscape.
The University of Michigan's preliminary reading on the overall index of consumer sentiment for January stands at an impressive 78.8, the highest since July 2021 and a significant leap from December's 69.7. This unexpected positive turn is occurring against a backdrop of a robust stock market, a healthy job market and stable gasoline prices.
One of the key takeaways is the decline in consumers' inflation expectations for the next 12 months to 2.9%, the lowest level since December 2020. This shift in expectations, down from 3.1% in December, aligns with a range observed before the onset of the COVID-19 pandemic. The prospect of lower inflation is welcomed news for the Federal Reserve, potentially opening the door for interest rate cuts in the coming months.
This surge in confidence could play a pivotal role in allaying fears of an impending recession. Despite inflation and high interest rate concerns, Americans maintained a spending spree driven by strong employment and wage gains.
Investors, in light of these positive developments, should consider strategic opportunities in the market. Sectors that traditionally thrive in times of economic optimism, such as retail, may present compelling investment avenues. As inflation expectations ease and consumer sentiment continues to improve, astute investors may find opportunities to capitalize on a more positive economic outlook.
Past-Year Price Performance
Image Source: Zacks Investment Research
4 Prominent Picks
Casey's General Stores, Inc. (CASY - Free Report) is a potential pick. Casey's price and product optimization strategies, increased penetration of private brands and digital engagements comprising the mobile app and online ordering capabilities are commendable. As the third-largest convenience retailer and the fifth-largest pizza chain, its distinctive self-distribution model, robust Inside category performance and strategic acquisitions are noteworthy strengths.
The Zacks Consensus Estimate for Casey's current fiscal sales and EPS suggests growth of 0.3% and 9%, respectively, from the year-ago reported figure. This Zacks Rank #1 (Strong Buy) company has a trailing four-quarter earnings surprise of 17.8%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
Investors can count on Target Corporation (TGT - Free Report) . This Minneapolis, MN-based company has been making multiple changes to its business model to adapt and stay relevant in the dynamic retail landscape. Target has been deploying resources to enhance omnichannel capabilities, come up with new brands, refurbish stores and expand same-day delivery options to provide customers with a seamless shopping experience. These have been contributing to the top line.
The Zacks Consensus Estimate for Target’s current financial-year EPS suggests growth of 38.5% from the year-ago reported figure. TGT, which sports a Zacks Rank #1, has a trailing four-quarter earnings surprise of 30.8%, on average.
Amazon.com, Inc. (AMZN - Free Report) is worth considering. The company’s robust e-commerce platform, renowned for its vast product selection and efficient delivery services, continues to be a primary driver of revenue growth. Prime membership, a cornerstone of Amazon's success, not only fosters customer loyalty but also drives recurring revenues through subscription fees, offering members exclusive access to a myriad of services, such as expedited shipping.
The Zacks Consensus Estimate for Amazon’s current financial-year sales and EPS suggests growth of 11.1% and 278.9%, respectively, from the year-ago reported figure. AMZN, which sports a Zacks Rank #1, has a trailing four-quarter earnings surprise of 54.9%, on average.
American Eagle Outfitters, Inc. (AEO - Free Report) is worth betting on. The company’s efforts to rationalize inventory and contain costs are paying off. The strong performance of key brands like American Eagle and Aerie, coupled with expansions into premium and activewear segments, indicates potential for growth. Its store designs and online enhancements demonstrate a commitment to improving the customer experience.
The Zacks Consensus Estimate for American Eagle Outfitters’ current fiscal sales and EPS suggests growth of 5% and 43.3%, respectively, from the year-ago reported figure. AEO, which carries a Zacks Rank #2 (Buy), delivered a trailing four-quarter earnings surprise of 23%, on average.