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5 Stocks to Buy on Steady Rise in Personal Spending, Income
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Americans are spending lavishly, driven by a rise in personal income and waning fears of a recession as inflation continues to ease. Although personal consumption expenditure (PCE), an important gauge for the Fed, increased marginally in December, people are a lot more confident that the economy will make a softer landing, which is lifting their confidence.
The Commerce Department said on Jan 26 that consumer spending increased 0.7% in December, higher than the consensus estimate of 0.5%. Also, personal income rose 0.3% in December, in line with expectations.
Easing inflation has once again lifted consumer sentiment, which is making them spend more freely as the Federal Reserve has indicated at ending its monetary tightening campaign after raising interest rates by 525 basis points since March 2022.
The Commerce Department also said that PCE inflation increased 0.2% in December from November’s unrevised decline of 0.1%. Core PCE, which excludes the volatile food and energy prices, also rose 0.2% in December, up from November’s increase of 0.1%.
However, year over year, PCE inflation increased 2.6%, while core PCE increased 2.9%, the smallest increase since March 2021.
The marginal month-over-month rise in inflation is not likely to impact the Federal Reserve’s decision much as it gears up to go for rate cuts in 2024. Investors are expecting the Federal Reserve to go for at least three 25-basis point rate cuts this year.
Lower interest rates bode well for the broader economy and allow consumers to spend more freely as they will have more purchasing power. Given this situation, investing in consumer discretionary stocks seems prudent.
Royal Caribbean Cruises Ltd. owns and operates three global brands — Royal Caribbean International, Celebrity Cruises and Azamara Club Cruises. Additionally, RCL has a 50% investment in a joint venture with TUI AG, which operates the brand TUI Cruises. Royal Caribbean Cruises' brands primarily serve the contemporary, premium and deluxe segments of the cruise vacation industry, which also includes the budget and luxury segments.
Royal Caribbean Cruises' expected earnings growth rate for the current year is 188.4%. The Zacks Consensus Estimate for current-year earnings has improved 0.6% over the past 60 days. RCL currently sports a Zacks Rank #1.
Netflix, Inc. is considered a pioneer in the streaming space. NFLX has been spending aggressively on building its portfolio of original shows. This is helping Netflix sustain its leading position despite the launch of new services like Disney+ and Apple TV+, as well as existing services like Amazon Prime Video.
Netflix’s expected earnings growth rate for the current year is 40.1%. The Zacks Consensus Estimate for current-year earnings has improved 5.8% over the past 60 days. Netflix presently sports a Zacks Rank #1.
OneSpaWorld Holdings is a provider and innovator in the fields of wellness, beauty, rejuvenation and transformation on cruise ships and land. OSW’s service includes traditional and alternative massage, body and skincare treatment options, ayurvedic treatments, comprehensive hair and nail services, fitness, acupuncture, herbal medicine, pain management, and medi-spa.
OneSpaWorld Holdings’ expected earnings growth rate for the current year is 139.3%. The Zacks Consensus Estimate for current-year earnings has improved 3.1% over the past 60 days. OSW carries a Zacks Rank #2 at present.
Pearson plc is a global media conglomerate. PSO publishes books, periodicals, reports and screen-based services for professional communities worldwide under brand names that include the Financial Times, Pitman Publishing and Churchill Livingstone.
Pearson’s expected earnings growth rate for the current year is 28.1%. The Zacks Consensus Estimate for current-year earnings has improved 2.5% over the past 60 days. PSO presently has a Zacks Rank #2.
Electronic Arts Inc., popularly known as EA, is a leading developer, marketer, publisher and distributor of digital interactive entertainment, including games, extra content and services. EA’s portfolio includes wholly owned games like Apex Legends, Battlefield, and The Sims or licensed from others, including Madden NFL, Star Wars and others.
Electronic Arts’expected earnings growth rate for the current year is 28.8%. The Zacks Consensus Estimate for the current-year earnings has improved 3.5% over the past 60 days. EA presently carries a Zacks Rank #2.
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5 Stocks to Buy on Steady Rise in Personal Spending, Income
Americans are spending lavishly, driven by a rise in personal income and waning fears of a recession as inflation continues to ease. Although personal consumption expenditure (PCE), an important gauge for the Fed, increased marginally in December, people are a lot more confident that the economy will make a softer landing, which is lifting their confidence.
The Commerce Department said on Jan 26 that consumer spending increased 0.7% in December, higher than the consensus estimate of 0.5%. Also, personal income rose 0.3% in December, in line with expectations.
Easing inflation has once again lifted consumer sentiment, which is making them spend more freely as the Federal Reserve has indicated at ending its monetary tightening campaign after raising interest rates by 525 basis points since March 2022.
The Commerce Department also said that PCE inflation increased 0.2% in December from November’s unrevised decline of 0.1%. Core PCE, which excludes the volatile food and energy prices, also rose 0.2% in December, up from November’s increase of 0.1%.
However, year over year, PCE inflation increased 2.6%, while core PCE increased 2.9%, the smallest increase since March 2021.
The marginal month-over-month rise in inflation is not likely to impact the Federal Reserve’s decision much as it gears up to go for rate cuts in 2024. Investors are expecting the Federal Reserve to go for at least three 25-basis point rate cuts this year.
Lower interest rates bode well for the broader economy and allow consumers to spend more freely as they will have more purchasing power. Given this situation, investing in consumer discretionary stocks seems prudent.
Our Choices
We have narrowed our search to five consumer discretionary stocks namely Royal Caribbean Cruises Ltd. (RCL - Free Report) , Netflix, Inc. (NFLX - Free Report) , OneSpaWorld Holdings (OSW - Free Report) , Pearson plc (PSO - Free Report) and Electronic Arts Inc. (EA - Free Report) that have strong potential for 2024. These stocks have seen positive earnings estimate revisions in the last 60 days. Each of our picks carries a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Royal Caribbean Cruises Ltd. owns and operates three global brands — Royal Caribbean International, Celebrity Cruises and Azamara Club Cruises. Additionally, RCL has a 50% investment in a joint venture with TUI AG, which operates the brand TUI Cruises. Royal Caribbean Cruises' brands primarily serve the contemporary, premium and deluxe segments of the cruise vacation industry, which also includes the budget and luxury segments.
Royal Caribbean Cruises' expected earnings growth rate for the current year is 188.4%. The Zacks Consensus Estimate for current-year earnings has improved 0.6% over the past 60 days. RCL currently sports a Zacks Rank #1.
Netflix, Inc. is considered a pioneer in the streaming space. NFLX has been spending aggressively on building its portfolio of original shows. This is helping Netflix sustain its leading position despite the launch of new services like Disney+ and Apple TV+, as well as existing services like Amazon Prime Video.
Netflix’s expected earnings growth rate for the current year is 40.1%. The Zacks Consensus Estimate for current-year earnings has improved 5.8% over the past 60 days. Netflix presently sports a Zacks Rank #1.
OneSpaWorld Holdings is a provider and innovator in the fields of wellness, beauty, rejuvenation and transformation on cruise ships and land. OSW’s service includes traditional and alternative massage, body and skincare treatment options, ayurvedic treatments, comprehensive hair and nail services, fitness, acupuncture, herbal medicine, pain management, and medi-spa.
OneSpaWorld Holdings’ expected earnings growth rate for the current year is 139.3%. The Zacks Consensus Estimate for current-year earnings has improved 3.1% over the past 60 days. OSW carries a Zacks Rank #2 at present.
Pearson plc is a global media conglomerate. PSO publishes books, periodicals, reports and screen-based services for professional communities worldwide under brand names that include the Financial Times, Pitman Publishing and Churchill Livingstone.
Pearson’s expected earnings growth rate for the current year is 28.1%. The Zacks Consensus Estimate for current-year earnings has improved 2.5% over the past 60 days. PSO presently has a Zacks Rank #2.
Electronic Arts Inc., popularly known as EA, is a leading developer, marketer, publisher and distributor of digital interactive entertainment, including games, extra content and services. EA’s portfolio includes wholly owned games like Apex Legends, Battlefield, and The Sims or licensed from others, including Madden NFL, Star Wars and others.
Electronic Arts’expected earnings growth rate for the current year is 28.8%. The Zacks Consensus Estimate for the current-year earnings has improved 3.5% over the past 60 days. EA presently carries a Zacks Rank #2.