The Consumer Discretionary sector is grabbing much of the attention right now, owing to an improving economy, backed by a favorable jobs scenario, increased consumer spending and enhanced consumer confidence.
While a tight labor market is improving wage growth, unemployment rate remains low. Meanwhile, expectedly slow and gradual interest rate hikes by the Federal Reserve ensures enough time for consumers to absorb them.
Furthermore, the Atlanta Federal Reserve’s GDPNow model forecasts gross domestic product (GDP) to grow a healthy 2.7% (annualized rate) in third-quarter 2017, higher than its previous expectation of 2.3% growth.
Markedly, all these factors influence consumers’ willingness to spend and spell good times ahead for this sector, which manufactures products that consumers buy because they want to and not because they need to.
Currently, the sector ranks at #7 (out of 16), thus placing it among the top 44% of the Zacks classified sectors.
A Need to Seek Advice from Brokers
Despite the healthy picture, there are a few factors that can still negatively impact the sector participants.
On such factor is fierce retail competition that is aggravated by the shift toward online shopping, thus affecting manufacturers’ margins. Meanwhile, appreciation of the U.S. dollar relative to foreign currencies seems to weigh on the revenues of companies with significant international operations. Also, macroeconomic concerns in certain regions of the globe, acts of terrorism as well as the recent hurricanes and other natural calamities are hurting the earnings of companies in the sector.
Amid these ups and downs, it might be prudent to follow the expert advice as brokerage firms have a clearer insight into which stocks will work for your portfolio. Notably, as brokers do intense research on stocks in their coverage before coming up with recommendations, it is of no doubt that investors should pay heed to their advice before investing in any such company. Thus, if the selected stocks have been endorsed by the brokers, they will probably be a safer bet.
With the help of the Zacks Stock Screener, we have zeroed-in on five stocks from the Zacks Consumer Discretionary with a Zacks Rank of #1 (Strong Buy) or #2 (Buy) and a favorable VGM Score. The crowning achievement is, however, the bullish sentiment of over 75% of brokerage firms on these stocks.
Our VGM Score identifies stocks that have the most attractive value, growth and momentum characteristics. In fact, our research shows that stocks with a VGM Score of A or B when combined with a Zacks Rank #1 or #2 make solid investment choices. You can see the complete list of today’s Zacks #1 Rank stocks here.
Further, these companies have also witnessed upward earnings estimate revisions recently. Since brokers follow the stocks in their coverage closely, they revise their earnings estimates on a stock after carefully examining the pros and cons of an event for the concerned company. Their action is certainly not arbitrary or illogical. Thus, estimate revisions serve as an important guide regarding the potential of a stock.
The Five Chosen Stocks
Sony Corp. SNE is a developer and seller of electronic equipment, instruments and devices for consumer, professional, and industrial markets worldwide. Furthermore, this Zacks Rank #2stock flaunts a VGM Score of A. Its Zacks Consensus Estimate for the current-year’s earnings has revised 0.4% upward over the last two months and reflects EPS growth of 362.8% year over year.
American Woodmark Corp. AMWD manufactures and distributes kitchen cabinets and vanities for the remodeling and new home construction markets. In addition, this Zacks Rank #2 company has a VGM Score of B. American Woodmark’s current-year earnings estimate has moved up 1.2% over the past two months. It is expected to post EPS growth of 11.5% year over year.
Gray Television, Inc. GNT is a communications company that operates television stations and currently has a Zacks Rank #2.The stock also flaunts a VGM Score of A. Gray Television has witnessed its current-year earnings estimate jump 75.3% in the past two months, reflecting EPS growth of 45.5% year over year.
Hilton Grand Vacations Inc. HGV, a division of Hilton Worldwide Holdings, markets and operates vacation ownership resorts. Further, this Zacks Rank #2 company has a VGM Score of A. Additionally, the Zacks Consensus Estimate for the company’s current-year earnings has revised 1% upward over the last two months and reflects EPS growth of 14.9% year over year.
Nexstar Broadcasting Group, Inc. NXST owns, operates, programs or provides sales and other services to television stations in the many states of the country. This Zacks Rank #2 flaunts a VGM Score of B. Further, the company’s current-year earnings estimate has moved up 3.6% in the last two months.
Thus, the aforementioned stock picks are expected to be good bets in the current scenario based on their ranks, strong fundamentals and brokers' confidence in them.
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