On Apr 26, the Bureau of Economic Analysis reported that U.S. GDP in first-quarter 2019 jumped beyond expectations to achieve the highest percentage increase in four years. This has come all the more as a surprise because several economists had estimated near-stagnant growth in late January and early February.
Several economic data of March also indicated that the fundamentals of the U.S. economy remained robust. All these positives were reflected in an impressive bull run in Wall Street. The U.S. economy is likely to perform steadily for the rest of 2019. Consequently, it will be prudent to invest in stocks with a favorable Zacks Rank that have soared this year and show strong growth potential ahead as well.
First-Quarter GDP Surges
The U.S. economy grew at a robust 3.2% in the first quarter of 2019, marking its highest first-quarter increase since 2015. The reading also surpassed the consensus estimate of 2.1%. This impressive result came despite a record-breaking 35-day long partial government shutdown and severe cold in January-February, which disrupted normal economic activities.
Net trade balance and inventories together contributed 1.7% of the increase. Exports grew 3.7% while import reduced by the same percentage. Irrespective of these two transitory items, personal consumption, which constitutes nearly 70% of the U.S. GDP, also grew by 1.2%. Moreover, investment in intellectual products jumped a huge 8.6%.
4 Major Economic Data of March
On Apr 1, the Institute for Supply Management (ISM) reported that U.S. manufacturing expanded in March for the 119th consecutive month. The March index came in at 55.3, easily surpassing the consensus estimate of 54.5. The new orders index rose to 57.4 from 55.5 in February. The ISM panel cited continued expansion of business activities supported by strong demand in the form of new orders and employment.
On Apr 5, the Department of Labor reported non-farm job additions of 196,000 for the month of March, signifying the 102th straight month of non-farm payroll growth. The figure was also above the consensus estimate of 184,000. First-quarter average job gains were a solid 180,000. The unemployment rate remained at a 50-year low of 3.8%.
On Apr 18, Department of Commerce reported that retail sales increased by a significant 1.6% in March outpacing the consensus estimate of 0.9%. March’s data reflect the highest monthly increase since September 2017 and a massive turnaround from a 0.2% decline in February.
On Apr 25, the Department of Commerce reported that durable goods (non-defense capital goods) orders in March climbed 2.7%, significantly above the consensus estimate of a mere 0.7%. Notably, the core durable goods orders (excluding aircraft) -- a closely watched proxy for business spending plans – rose 1.3%, its highest in eight months.
Our Top Picks
At this stage, it will be prudent to invest in stocks with a favorable Zacks Rank that have soared so far in 2019 and still have momentum. We narrowed down our search to five such stocks, each carrying a Zacks Rank #2 (Buy) and having a VGM Score of either A or B. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The chart below shows price performance of our five picks year to date.
CMCSA Corp. CMCSA operates as a media and technology company worldwide. It operates through Cable Communications, Cable Networks, Broadcast Television, Filmed Entertainment, Theme Parks, and Sky segments. The stock carries a VGM Score of B. The company has an expected earnings growth rate of 12.6% for the current year. The Zacks Consensus Estimate for the current year has improved 3.6% over the last 30 days.
Intuit Inc. INTU provides financial management and compliance products and services for small businesses, consumers, self-employed, and accounting professionals in the United States, Canada, and internationally. The stock carries a VGM Score of B. The company has an expected earnings growth rate of 17.3% for the current year. The Zacks Consensus Estimate for the current year has improved 0.5% over the last 30 days.
AutoZone Inc. AZO retails and distributes automotive replacement parts and accessories. The company offers various products for cars, sport utility vehicles, vans, and light trucks, including new and remanufactured automotive hard parts, maintenance items, accessories, and non-automotive products. The stock carries a VGM Score of A. The company has an expected earnings growth rate of 22.7% for the current year. The Zacks Consensus Estimate for the current year has improved 0.1% over the last 30 days.
Chipotle Mexican Grill Inc. CMG operates Chipotle Mexican Grill restaurants, which serve a focused menu of burritos, tacos, and burrito bowls (a burrito without the tortilla) and salads, made using fresh ingredients. The stock carries a VGM Score of B. The company has an expected earnings growth rate of 42.4% for the current year. The Zacks Consensus Estimate for the current year has improved 5.3% over the last 30 days.
Lockheed Martin Corp. LMT a security and aerospace company engages in the research, design, development, manufacture, integration, and sustainment of technology systems, products and services worldwide. The stock carries a VGM Score of B. The company has an expected earnings growth rate of 14.7% for the current year. The Zacks Consensus Estimate for the current year has improved 3.7% over the last 30 days.
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