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5 Discretionary Stocks to Buy as Inflation Continues to Ease

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Inflationary pressures are finally easing in the second quarter, with the consumer price index (CPI) reading remaining unchanged in May after dropping in April.

The Labor Department reported on Jun 12 that CPI remained unchanged in May on a month-over-month basis after increasing 0.3% in April. May’s reading was also 0.1% lower than the consensus estimate and the softest reading since July 2022. 

Year over year, CPI rose 3.3%, which came in slightly below analysts’ expectation of a rise of 3.4%.

Core CPI, which excludes the volatile food and energy prices, rose 0.2% sequentially and 3.4% from year-ago levels, both below the consensus estimate of a rise of 0.3% and 3.5%, respectively.

The decline in inflation in May came as cheaper gasoline prices overshadowed higher rental costs. Gasoline prices declined 3.6% in May after increasing 2.8% in the prior month. However, the cost of rent jumped 0.4% in May for the second straight month.

Also, the Federal Reserve left interest rates unchanged in its June Federal Open Market Committee meeting on Jun 12 in its current range of 5.25-5.5%. The Fed has now left interest rates unchanged for the past 11 months.

Inflation has loosened its grip slightly over the economy in the past two months after increasing in the first quarter, which had ignited fears that the Federal Reserve could once again hike interest rates.

The Federal Reserve has already been delaying its proposed rate cuts and hasn’t given any timeline for the first rate cut. However, investors have kept aside those fears and have once again become optimistic about rate cuts in the near term.

On Wednesday, the Federal Reserve said that inflation is easing but at a slow pace, and it now sees only one rate cut this year, down from the three expected earlier this year.

However, investors cheered the Fed’s statement as a single rate cut this year will also significantly lower borrowing costs, which bodes well for the economy and the broader market.   

Our Choices

We have narrowed our search to five consumer discretionary stocks such as Hasbro, Inc. (HAS - Free Report) , Crocs, Inc. (CROX - Free Report) , Lifetime Brands, Inc. (LCUT - Free Report) , Netflix, Inc. (NFLX - Free Report) andRoyal Caribbean Cruises Ltd. (RCL - 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 stocks here.   

Hasbro, Inc. is engaged in the design, manufacture and marketing of games and toys. HAS offers traditional, high-tech and digital toys, games and licensed products under various well-known brands.

Hasbro’sexpected earnings growth rate for the current year is 45.8%. The Zacks Consensus Estimate for current-year earnings has improved 13% over the past 60 days. HAS presently sports a Zacks Rank #1.

Crocs, Inc. 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 5.2%. The Zacks Consensus Estimate for current-year earnings has improved 1.6% over the past 60 days. CROX presently has a Zacks Rank #2.

Lifetime Brands, Inc. is a leading designer, marketer and distributor of kitchenware, cutlery & cutting boards, bakeware & cookware, pantry ware & spices, tabletop and bath accessories. LCUT markets its products under various trade names, including Farberware, KitchenAid, Pfaltzgraff, Cuisinart, Hoffritz, Sabatier, Nautica, DBK-Daniel Boulud Kitchen, Joseph Abboud Environments, Roshco, Baker's Advantage, Kamenstein, CasaModa, Kathy Ireland, and USE.

Lifetime Brands’ expected earnings growth rate for the current year is 40.4%. The Zacks Consensus Estimate for current-year earnings has improved 1.4% over the past 90 days. LCUT presently carries a Zacks Rank #2.

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 52.2%. The Zacks Consensus Estimate for the current-year earnings has improved 7.3% over the past 60 days. Netflix currently sports a Zacks Rank #1.

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’ cruise 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 63.8%. The Zacks Consensus Estimate for current-year earnings has improved 10.8% over the past 60 days. RCL currently has a Zacks Rank #2.

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