For Immediate Release
Chicago, IL – February 6, 2018 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Tailored Brands (TLRD - Free Report) , Sleep Number (SNBR - Free Report) , Acushnet Holdings (GOLF - Free Report) , Boyd Gaming (BYD - Free Report) and Malibu Boats (MBUU - Free Report) .
Here are highlights from Monday’s Analyst Blog:
Wages See Fastest Growth Since 2009: Top 5 Gainers
Americans are now getting fatter paychecks, with wages growing at the quickest pace since the end of the last decade. This has been largely driven by a tighter labor market, tax cut policy and a rise in the minimum wage threshold in several states.
Higher wage growth plays a significant role in driving consumer discretionary spending. Consumers have been ramping up their spending levels of late, with holiday splurging to end 2017, while consumer confidence rose more than forecast in January. More the confidence households generate, the higher will be the amount they spend.
Thus, stocks of consumer discretionary companies are poised to move north on signs of renewed consumer spending strength.
Americans Get a Raise
The labor market has come a long way since the Great Recession, with broad-based job gains recorded in January. Non-farm payrolls climbed by 200,000 jobs last month after rising 160,000 last December, per the Labor Department. In fact, the economy added jobs for 88 successive months, while unemployment rate remained unchanged at a 17-year low of 4.1%.
But, it was wage growth that hit the fastest pace in January in more than eight-and-a-half years. Average hourly wages increased 9 cents, or 0.3%, to $26.74. This helped the average year-on-year hourly earnings to rise to 2.9%, the highest since June 2009. Even though the Federal Reserve would like wages to grow 3% or more, the Feb 2 report was, nevertheless, a welcome sign for workers following years of stagnant pay.
Joseph Brusuelas, chief U.S. economist at RSM, said that 2018 “will be a year of rising wages and the tightest labor market in over a generation.” In a tight labor market, more jobs are available than workers to fill them. This in turn compels companies to pay more and retain workers. Some market pundits believe that the tax cut will boost wage growth as companies will use that extra money to give workers a raise. Needless to say, several states have raised wages. Minimum wage has been raised in 18 states in January, which had a positive impact on 4.5 million workers, per the Economic Policy Institute think-tank.
This uptick in average hourly earnings dispels doubts that wage growth will remain lackluster. To top it, worker compensation touched an almost three-year high, according to the Employment Cost Index. In the fourth quarter, the index rose 0.6%. Wages, which account for nearly 70% of employment costs, increased 0.5% in the last three months of last year. So did other benefits. Meanwhile, compensation jumped 2.6% in the 12 months ended December 2017, matching the largest rise since early 2015.
Wage Growth to Boost Consumer Discretionary Spending
Among the economic factors that mostly affect demand for consumer discretionary goods is wage growth. If wages keep rising, consumers generally have more discretionary income to spend. In contrast, if wage growth falls or remains stagnant then demand for such goods decline.
The economy has been driven by solid consumer spending in the fourth quarter. The main engine of the economy grew at 3.8% over the quarter after a 2.2% gain in the third quarter. Consumer outlays, thus, registered the fastest pace of growth in the fourth quarter in almost two years. Additionally, consumer spending increased 0.4% in December, marking the biggest increase in household buying since 2011.
Consumer confidence, in the meantime, was stronger than expected in January and hovered near a 17-year high, according to the Conference Board. Households were more confident about the current state of the economy. Such an upbeat state will further help household spending to increase by leaps and bounds.
5 Solid Choices
Courtesy of record wage growth and more confident consumers, discretionary spending levels will continue to increase. The consumer discretionary sector is, thus, poised to benefit the most as spending plays a major role in determining its revenues.
We have, thus, selected five solid consumer discretionary stocks that should make meaningful additions to your portfolio. These stocks flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy). The search was also narrowed down with a VGM Score of A or B. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three metrics. Such a score allows you to eliminate the negative aspects of stocks and select winners.
Tailored Brands is a specialty apparel retailer offering suits, suit separates, sport coats, slacks, business casual, sportswear, outerwear, dress shirts, shoes and accessories for men and tuxedo and suit rental product. The company has a Zacks Rank #2 and a VGM Score of A. The Zacks Consensus Estimate for its current-year earnings rose 14.2% in the last 90 days. The company is expected to return 18.8% this year, higher than the industry’s estimated return of 9.3%.
Sleep Number is a designer, manufacturer, marketer, retailer and servicer of a line of Sleep Number beds. The company has a Zacks Rank #2 and a VGM Score of A. The Zacks Consensus Estimate for its current-year earnings rose 10.7% in the last 90 days. The company is expected to return 24.6% this year, higher than the industry’s projected return of 6.8%.
Acushnet Holdings — a Zacks Rank #1 company — designs, develops, manufactures and distributes golf products worldwide. The company has a VGM Score of B. The Zacks Consensus Estimate for its current-year earnings advanced 4.2% in the last 90 days. The stock is expected to return 79.7% this year, higher than the industry’s estimated return of 12.2%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Boyd Gaming is a multi-jurisdictional gaming company. The company has a Zacks Rank #2 and a VGM Score of B. The Zacks Consensus Estimate for its current-year earnings increased 6.3% in the last 90 days. The company is expected to return 14.3% this year, higher than the industry’s projected return of 8.1%.
Malibu Boats is a designer, manufacturer and marketer of performance sport boats. The stock has a Zacks Rank #2 and a VGM Score of B. The Zacks Consensus Estimate for its current-year earnings rose 4.7% in the last 90 days. Malibu Boats is expected to return 27.6% this year, higher than the industry’s projected return of 12.2%.
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