With the holiday season underway, it would be prudent of investors to take a look at the leisure space for strengthening their portfolios as majority of leisure products and service providers rake in handsome gains from increased sales during this time of the year.
The leisure industry — an amalgamation of companies providing recreational products and services such as swimming pools, golf courses, boats, outdoor spaces, cruises, travel etc. —primarily thrives on overall economic growth and consumer spending. A healthy labor market, rising wages and strong household finances have resulted in increased household spending across the United States, which in turn is likely to aid the leisure space.
Why Are Consumers on a Spending Spree?
National Retail Federation president and CEO Matthew Shay remains optimistic regarding overall economic growth in the remaining period of 2018. Shay believes that the holiday season will witness strong consumer spending, as consumer confidence have been robust on the back of an overall flourishing labor market.
Per a report by eMarketer, consumers in the United States are likely to spend more than $1 trillion on retail goods this holiday season. Moreover, U.S. consumer confidence surged to its highest in 18 years in the month of October, per the Conference Board. Consumer confidence index climbed to 137.9 in October from 135.3 in September, and future expectations signal the continuation of the uptrend.
The primary reason behind the consumers’ confidence and indulgent ways is a robust economy. Per the advance estimate reported by the Bureau of Economic Analysis, gross domestic product (GDP) increased at an annualized rate of 3.5% in the third quarter, compared with growth of 4.2% in the second quarter. Overall the economy expanded 3.2% in the first half of 2018 and is on track to achieve Trump administration’s annual growth target of 3%.
Further, the Fed raised outlook on U.S. economic growth. Current year economic growth is currently pegged at 3.1%. This is likely to support the industry’s growth in 2018.
VIDEO Leisure Companies Thrive on Consumer Spending: 5 Solid Picks
The leisure space, which belongs to the
Consumer Discretionary sector, is expected to benefit this holiday season from increased consumer spending. Although the sector has underperformed the S&P 500 composite market over the past year, better performances are anticipated going forward.
Apart from a robust economy and increased personal expenditure, the sector is positioned to gain from increased demand for leisure products and services. According to a report by Statista, revenues at the sports and outdoor space are expected to witness a compound annual growth rate (CAGR) of 9.9% from 2018 to 2022.
With the aid of the
Zacks Stock Screener, we have zeroed in on five lucrative leisure stocks with a Zacks Rank #1 (Strong Buy) or #2 (Buy) You can see the complete list of today’s Zacks #1 Rank stocks here .
These stocks have exhibited northward estimate revision in earnings estimates, indicating analysts’ optimism surrounding their future earnings potential.
The Marcus Corporation ( MCS - Free Report) sports a Zacks Rank #1. The company provides entertainment in forms of movie theatres, hotels and resorts. The holiday season is expected to aid the company in terms of increased sales as consumers are likely to indulge in such offerings. Over the past 30 days, analysts have revised the company’s earnings estimates for the current year to $1.88, reflecting 3.3% increase from earlier estimates. Marine Products Corporation ( MPX - Free Report) is the third-largest distributor of sterndrive powerboats in the United States. The company designs, manufactures and distributes premium-branded Chaparral sterndrive pleasure boats and Robalo outboard offshore fishing boats. Demand for the company’s products are expected to receive a boost from the strong consumer spending. Earnings estimates for 2018 have been revised upward by 6% over the last 30 days, reflecting analysts’ optimism surrounding the company’s future earnings potential. Marine Products flaunts a Zacks Rank #1.
A Zacks Rank #2 stock,
SeaWorld Entertainment, Inc. ( SEAS - Free Report) , has been witnessing positive earnings estimate revisions for the current year. Over the past month, analysts have raised earnings estimates by 4.2%, suggesting that the company is expected to provide better returns in the future. As it is, the holiday season and upbeat consumer confidence is likely to benefit SeaWorld’s top-line as it provides consumers with typical leisure-oriented theme parks.
Another boat maker,
Malibu Boats, Inc. ( MBUU - Free Report) , carries a Zacks Rank #2. For 2018, the Zacks Consensus Estimate for earnings has moved from $3.25 to $3.40 over the month, due to six upward revisions against none in the opposite direction. Callaway Golf Company ( ELY - Free Report) , a provider of golf putts, carries a Zacks Rank #2. Over the last 30 days, nine analysts have revised estimates upwards for the current year while one revised estimates downward. Consequently, the Zacks Consensus Estimate for the current year has risen from $1 to $1.05 in the period. For 2018, earnings are projected to grow 98.1% year over year. Will You Make a Fortune on the Shift to Electric Cars?
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