Subdued retail sales data along with soft job addition and contraction in the manufacturing and service sectors last month, kept investors on the tenterhooks, raising concerns that the economy was losing steam. However, they may now have a reason to cheer as Consumer Confidence – a key determinant of the economy’s health – improved significantly in September, reaching its pinnacle since the recession.
Consumer Confidence Surges: What Does it Mean?
According to the recent Conference Board data, the Consumer Confidence Index increased to 104.1 in September from the August reading of 101.8, and is at its highest level since August 2007. Industry experts believe that still lower gasoline prices and an improving job picture may have acted as catalysts in boosting consumer sentiment. In spite of worries pertaining to global financial health, analysts believe that the U.S. economy may withstand the overall gloom.
The report underscores that the economy, which is heading towards its 58th Presidential Election, is not devoid of momentum. The stock market bounced yesterday on the heels of favorable consumer confidence data and the outcome of the first presidential election debate, where Hillary Clinton, the Democratic contender had an edge over Donald Trump, the Republican candidate.
The major indices ended trading in the green. The Dow Jones Industrial Average climbed 133.47 points or 0.74% to 18,228.30, while Nasdaq Composite rose 48.22 points or 0.92% to 5,305.71. The S&P 500 advanced 13.83 points or 0.64% to 2,159.93. The Fed officials must be keeping a close watch on how the economy unfolds before they decide to go for a hike in the benchmark interest rate sometime before the end of the year.
Retail Sector Holds the Baton
Still lower gasoline prices, improving labor market, higher consumer confidence and a gradual improvement in the housing market are signals that the economy is on a recovery mode, and undoubtedly the retail sector presents itself as a lucrative investment hub. Here we have highlighted 5 Retail-Wholesale Stocks that are ready to ride on the confidence exuded by the economy. These have a favorable combination of a Zacks Rank #1 (Strong Buy) or 2 (Buy), with a VGM Score of “A” or “B.”
We suggest investing in The Children's Place, Inc. (PLCE - Snapshot Report) , with a long-term earnings growth rate of 10.3% and a VGM Score of “A.” This specialty retailer of children's apparel delivered an average positive earnings surprise of 33.1% over the trailing four quarters, and flaunts a Zacks Rank #1. It is expected to witness earnings growth of 30.4% in fiscal 2016 and 10.7% in fiscal 2017. The Zacks Consensus Estimate too has been on the rise over the past 60 days.
Investors can count on Urban Outfitters Inc. (URBN - Analyst Report) , a lifestyle specialty retail company that posted an average positive earnings surprise of 6.7% over the trailing four quarters and has a VGM Score of “A.” The company is expected to witness earnings growth of 16.1% in fiscal 2017 and 9.1% in fiscal 2018. The Zacks Consensus Estimate has moved north over the past 60 days. The stock has a long-term earnings growth rate of 15%, with a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Burlington Stores, Inc. (BURL - Snapshot Report) , retailer of branded apparel products, is a solid bet, with a Zacks Rank #2 and a VGM Score of “A.” The company delivered an average positive earnings surprise of 16.1% over the trailing four quarters and has a long-term earnings growth rate of 18.4%. It is expected to witness earnings growth of 29.1% in fiscal 2016 and 18.1% in fiscal 2017. The Zacks Consensus Estimate too has been trending up over the past 60 days.
Another stock that investors may consider is Big Lots Inc. (BIG - Analyst Report) , with a Zacks Rank #2, a long-term earnings growth rate of 13.4% and a VGM Score of “A.” The company delivered an average positive earnings surprise of 8% over the trailing four quarters. It is expected to witness earnings growth of 18.7% in fiscal 2016 and 10.7% in fiscal 2017. The Zacks Consensus Estimate too has been on the rise over the past 60 days.
Last but not the least is Papa John's International Inc. (PZZA - Analyst Report) , with a Zacks Rank #2, long-term earnings growth rate of 15.5% and a VGM Score of “B.” The company, which operates and franchises pizza delivery and carryout restaurants under the Papa Johns trademark, posted an average positive earnings surprise of 7.8% over the trailing four quarters. It is expected to witness solid earnings growth of 17.4% in 2016 and 11.4% in 2017. The Zacks Consensus Estimate too has moved north over the past 60 days.
While these five stocks are not the end of the road, with the help of the Zacks Stock Screener and permutation and combination, you can find out stocks that have the potential to beat the market.
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