7 Stocks Poised to Benefit From Strong Economic Growth in Q4
All signs suggest that the U.S. economy is actually doing quite well. In the second quarter, U.S. GDP expanded at an impressive annualized real rate (over and above inflation) of 2.1% in the second quarter. For the third quarter, the Federal Reserve predicts that the economy will soar an annualized, real, seasonally adjusted 4.9%. Moreover, the labor market remains very strong, with the unemployment rate at 3.8%. Meanwhile, the forces enabling the U.S. economy to grow rapidly, including energy transformation, and strong consumer spending continue to stay intact. So, I strongly believe the economy will continue to expand significantly going forward. That being said, here are seven ways to trade that strength.
Strong U.S. Economy Stocks: Roku (ROKU)
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Roku (NASDAQ:ROKU) is well-positioned to benefit from the growth of ad spending in the U.S. In fact, according to Ad Age, ad revenue is expected to climb a healthy 5% this year. By 2024, it’s expected to grow another 8.1%.
Moreover, the “streaming wars” are heating up, with nearly 30% of U.S. households canceling one or more streaming services to save money. Also, since I’ve seen many other streaming services, including Fox’s (NASDAQ:FOXA) Fox Nation and Apple’s (NASDAQ:AAPL) streaming service advertise on Roku, I believe that these renewed streaming wars will boost Roku’s financial results going forward. Roku already began benefiting from the rejuvenated ad market last quarter, as its sales climbed an impressive 11% year over year.
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Meta Platforms (META)
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Like Roku, Meta (NASDAQ:META) is well-positioned to benefit from the rejuvenation of digital ad spending.
Indeed, in the second quarter, the company’s ad revenue climbed 12% year over year to $31.5 billion. According to Modern Retail, the rebound of Meta’s ad revenue was partially driven by e-commerce marketers. In addition, the publication says analysts expect online ad spending to continue to climb as U.S. e-commerce revenue expands.
Moreover, Morgan Stanley says Meta’s earnings per share could surge to $20 next year thanks Reels, Click to Message, and ads businesses. The bank maintained a $375 price target and an “overweight” rating on the shares.META stock trades at a rather low forward price-earnings ratio of 18.6 times.
Strong U.S. Economy Stocks: Brinker (EAT)
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As I’ve noted in previous columns, I expect restaurant chains to benefit from the easing of the “revenge travel” trend and a stronger U.S. economy. That’s because, with consumers spending less on large travel expenses like airfare, hotels, and auto rentals, they’ll have more funds to spend at their local restaurants.
Brinker (NYSE:EAT) seems like a good candidate to get a significant boost from this trend. Helping, Stifel just upgraded the shares to “buy” from “hold,” citing its belief that the company can rejuvenate the performance of its Chili’s chain. Stifel also raised its price target on the shares to $45. Analysts, on average, expect the company’s EPS to rise to $3.77 next year from $2.83 in 2022. And EAT stock has a very low forward price-earnings ratio of 9.5.
Rivian (RIVN)
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Rivian (NASDAQ:RIVN) appears to be well-positioned to become a leading seller of electric SUVs. In fact, strong economic growth should enable more consumers to buy Rivian’s EVs this quarter and in 2024. Helping, analysts at Evercore upgraded RIVN stock to “outperform.” The bank expects the company’s Q3 margin to come in ahead of the Street’s mean estimate. It also predicts that the company’s gross margins will hit the break-even level in the second quarter of next year. In addition, the firm says Rivian will be able to produce more than 80,,000 EVs next year. Evercore has a $35 price target on RIVN.
Strong U.S. Economy Stocks: Ross Stores (ROST)
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While the U.S. economy is showing signs of improvement, higher costs are still causing chaos for consumers. As a result, many of these consumers will likely look to shop at discount stores such as Ross (NASDAQ:ROST). At the same time, Ross could benefit from consumers trading up from chains like Walmart (NYSE:WMT) and the dollar stores.
Investment bank Jefferies recently named ROST as one of the companies likely to benefit from a trend of shopping at “deep value” retailers. The firm noted that, in a survey of shoppers with children, Ross was one of the five chains at which respondents expected to spend more going forward. Analysts, on average, expect Ross’ EPS to climb to $5.71 in 2024 from $4.38 in 2022, and the company has a reasonable forward price-earnings ratio of 21.9.
Chipotle (CMG)
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Chipotle (NYSE:CMG) is a restaurant chain that’s well-positioned to benefit both from strong economic growth and reduced spending by consumers on travel.
Helping, analysts at Baird reiterated that CMG is a “top idea” for investors, citing its belief that the chain’s traffic can climb this quarter. The firm is also upbeat about the impact of the company’s current limited-time offer of carne asada. Also bullish on CMG stock was Seeking Alpha columnist The Value Seeker, who is upbeat on the firm because of its “aggressive restaurant expansion plan and its focus on digital innovation.”
Analysts, on average, expect the company’s EPS to jump to $52.59 in 2024 from $32.78 in 2022.
Robert Half (RHI)
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Recruitment firm Robert Half (NYSE:RHI) reported disappointing second-quarter financial results. In fact, its bottom line plunged to $106.29 million from $175 million year over year. The company blamed slow hiring due to “macro uncertainties” for the relatively weak quarter. I believe that, with many companies finally realizing that a recession is not around the corner, those uncertainties will ease. Additionally, the slight tightening of the labor market that’s occurring now could make more workers amendable to leaning on Robert Half’s recruiters for help finding their next positions, instead of easily doing so themselves.
On the date of publication, Larry Ramer held a long position in RIVN. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Larry Ramer has conducted research and written articles on U.S. stocks for 15 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been PLUG, XOM and solar stocks. You can reach him on Stocktwits at @larryramer.
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