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4 Discretionary Stocks to Buy on Robust Consumer Spending
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Americans are earning more and spending lavishly as price pressures and inflation have eased. Higher personal income and consumer spending coupled with a resilient labor market made the Federal Reserve’s job difficult in bringing down inflation.
However, the Federal Reserve’s aggressive monetary tightening campaign saw inflation cooling substantially over the past year despite the challenges. The Commerce Department reported on Mar 29 that personal income increased $66.5 billion or 0.3% month over month in February.
Disposable personal income, which is calculated after paying personal current taxes, rose $50.3 billion or 0.2% in February.
Simultaneously, consumer spending jumped $145.5 billion or 0.8% month over month in February. Personal savings totaled $745.7 billion and the personal saving rate came in at 3.6% in February.
Inflation ticked up slightly in February, with the personal consumption expenditures (PCE) price index, the Fed’s favorite inflation gauge, increasing 0.3% month over month, after increasing 0.4% in January.
Core PCE, which excludes the volatile food and energy costs, also rose 0.3% in February after increasing 0.5% in January. Year over year, PCE increased 2.5%, while core PCE increased 2.8%.
Easing inflation is allowing consumers to spend more freely. The U.S. economy, too, has been growing at a solid pace. GDP grew 3.4% in the fourth quarter of 2023.
The Federal Reserve has left its benchmark policy rate unchanged since July 2023 in the range of 5.25-5.5% after hiking it on 10 straight occasions by 525 basis points since March 2022.
The central bank is now gearing up to cut interest rates at least thrice this year. Lower borrowing costs will allow consumers to spend more freely. Given this situation, investing in consumer discretionary stocks seems to be a wise idea.
Our Choices
We have narrowed our search to five consumer discretionary stocks 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).
Crocs, Inc. (CROX - Free Report) is one of the leading footwear brands with a focus on comfort and style. CROX offers a wide variety of footwear products, including sandals, wedges, flips and slides that cater to people of all ages.
Crocs’ expected earnings growth rate for the current year is 2.9%. The Zacks Consensus Estimate for current-year earnings has improved 3.8% over the past 60 days. CROX presently has a Zacks Rank #2.
Interface, Inc. (TILE - Free Report) is the world's largest manufacturer of modular carpet, which it markets under the Interface and FLOR brands. TILE is committed to the goal of sustainability and doing business in ways that minimize the impact on the environment while enhancing shareholder value.
Interface’sexpected earnings growth rate for the current year is 2%. The Zacks Consensus Estimate for current-year earnings has improved 32.5% over the past 60 days. TILE presently sports a Zacks Rank #1.
Royal Caribbean Cruises Ltd. (RCL - Free Report) 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 47.9%. The Zacks Consensus Estimate for current-year earnings has improved 9.4% over the past 60 days. RCL currently sports a Zacks Rank #1.
American Woodmark Corporation (AMWD - Free Report) is the third-largest manufacturer of kitchen and bath cabinets. Offering more than 340 cabinet lines in a wide variety of designs, materials and finishes, AMWD products are sold through a network of dealers and distributors and directly to home centers and major homebuilders.
American Woodmark’sexpected earnings growth rate for the current year is 14.4%. The Zacks Consensus Estimate for the current-year earnings has improved 3% over the past 60 days. AMWD currently sports a Zacks Rank #1.
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4 Discretionary Stocks to Buy on Robust Consumer Spending
Americans are earning more and spending lavishly as price pressures and inflation have eased. Higher personal income and consumer spending coupled with a resilient labor market made the Federal Reserve’s job difficult in bringing down inflation.
However, the Federal Reserve’s aggressive monetary tightening campaign saw inflation cooling substantially over the past year despite the challenges. The Commerce Department reported on Mar 29 that personal income increased $66.5 billion or 0.3% month over month in February.
Disposable personal income, which is calculated after paying personal current taxes, rose $50.3 billion or 0.2% in February.
Simultaneously, consumer spending jumped $145.5 billion or 0.8% month over month in February. Personal savings totaled $745.7 billion and the personal saving rate came in at 3.6% in February.
Inflation ticked up slightly in February, with the personal consumption expenditures (PCE) price index, the Fed’s favorite inflation gauge, increasing 0.3% month over month, after increasing 0.4% in January.
Core PCE, which excludes the volatile food and energy costs, also rose 0.3% in February after increasing 0.5% in January. Year over year, PCE increased 2.5%, while core PCE increased 2.8%.
Easing inflation is allowing consumers to spend more freely. The U.S. economy, too, has been growing at a solid pace. GDP grew 3.4% in the fourth quarter of 2023.
The Federal Reserve has left its benchmark policy rate unchanged since July 2023 in the range of 5.25-5.5% after hiking it on 10 straight occasions by 525 basis points since March 2022.
The central bank is now gearing up to cut interest rates at least thrice this year. Lower borrowing costs will allow consumers to spend more freely. Given this situation, investing in consumer discretionary stocks seems to be a wise idea.
Our Choices
We have narrowed our search to five consumer discretionary stocks 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).
Crocs, Inc. (CROX - Free Report) is one of the leading footwear brands with a focus on comfort and style. CROX offers a wide variety of footwear products, including sandals, wedges, flips and slides that cater to people of all ages.
Crocs’ expected earnings growth rate for the current year is 2.9%. The Zacks Consensus Estimate for current-year earnings has improved 3.8% over the past 60 days. CROX presently has a Zacks Rank #2.
Interface, Inc. (TILE - Free Report) is the world's largest manufacturer of modular carpet, which it markets under the Interface and FLOR brands. TILE is committed to the goal of sustainability and doing business in ways that minimize the impact on the environment while enhancing shareholder value.
Interface’sexpected earnings growth rate for the current year is 2%. The Zacks Consensus Estimate for current-year earnings has improved 32.5% over the past 60 days. TILE presently sports a Zacks Rank #1.
Royal Caribbean Cruises Ltd. (RCL - Free Report) 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 47.9%. The Zacks Consensus Estimate for current-year earnings has improved 9.4% over the past 60 days. RCL currently sports a Zacks Rank #1.
American Woodmark Corporation (AMWD - Free Report) is the third-largest manufacturer of kitchen and bath cabinets. Offering more than 340 cabinet lines in a wide variety of designs, materials and finishes, AMWD products are sold through a network of dealers and distributors and directly to home centers and major homebuilders.
American Woodmark’sexpected earnings growth rate for the current year is 14.4%. The Zacks Consensus Estimate for the current-year earnings has improved 3% over the past 60 days. AMWD currently sports a Zacks Rank #1.