Consumers stood pat throughout summer despite fragile global growth and trade-related concerns. This can be attributed to a bounce back in consumer sentiment in September from an almost three-year low as well as better-than-expected retail sales in August. Thus, one thing that can be said with certainty is that households will continue to deliver for the economy, at least for now.
U.S. consumer sentiment rebounded modestly this month. Per the University of Michigan, its consumer sentiment index came in at 92 in September, up from 89.8 in late August. Analysts had expected sentiment to rebound to 91.4. To top it, the current conditions index rose to 106.9 in September from 105.3 in the prior month. The index of expectations also climbed to 82.4 from 79.9 in August.
What’s more, sales at U.S. retailers rose 0.4% last month, mostly led by motor vehicle and online purchases, according to the Commerce Department. Retail sales climbed north after an upwardly revised 0.8% increase in July. By the way, the measure that excludes car dealers, food services, building materials, stores and gasoline stations rose 0.3%, on par with projections. Needless to say, this core retail sales measure is predominantly viewed as a more reliable gauge of underlying consumer demand.
Buoyed by a resilient labor market and solid income gains, consumers are the primary source of firepower for economic growth amid moribund factory output. As a matter of fact, the latest retail sales report indicates another encouraging quarter of household consumption, which grew at the fastest pace in the April-June period since 2014.
Tin Quinlan, senior economist at Wells Fargo Securities, rightly pointed out that “at a time when recession risk dominates most economic discussions, the strength of the U.S. consumer is among the more compelling examples of an economy that is still firing on all cylinders.”
Things Looking Up for Payment Stocks
With consumer spending picking up, there are certain companies that benefit more than others. Payment processors, who act as a liaison between consumers and merchants, stand to gain the most in an environment of increasing consumer outlays. We have, thus, selected payment stocks worth having a look at as they continue to show long-term gains in line with increase in consumer spending.
Fiserv, Inc. FISV, together with its subsidiaries, provides technology services to banks, brokers and credit organizations, to name a few. While Fiserv has received upgrade ratings from several renowned analysts, it currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
In the last 60 days, four earnings estimates moved up, while three moved down for the current year. The Zacks Consensus Estimate for current-year earnings has risen 6.1% in the same period. The company’s expected earnings growth rate for the current year is 23.6%, higher than the Financial Transaction Services industry’s projected rally of 9.7%. The stock has outperformed the broader industry so far this year (+42.9% vs +37.5%).
Visa Inc. V operates as a payments technology company. The company facilitates commerce through the transfer of value and information among consumers, merchants, financial institutions, businesses, strategic partners, and government entities. Visa continues to benefit from the Visa Europe acquisition, increasing business volumes, investment in digital technology and a solid balance sheet.
Visa currently has a Zacks Rank #2 (Buy). In the last 60 days, two earnings estimates moved up, while none moved down for the current year. The Zacks Consensus Estimate for current-year earnings has risen 0.2% in the same period. The company’s expected earnings growth rate for the current year is 17.1%, higher than the Financial Transaction Services industry’s projected rally of 9.7%. The stock has outperformed the broader industry over the past year (+16.9% vs +14.1%).
PayPal Holdings, Inc. PYPL operates as a technology platform and digital payments company. The company’s total revenues and earnings per share have increased so far this year. New user growth was cited as a reason for the strong show.
The company currently has a Zacks Rank #3 (Hold). In the last 60 days, four earnings estimates moved up, while two moved down for the current year. The Zacks Consensus Estimate for current-year earnings has risen 0.6% in the same period. The company’s expected earnings growth rate for the current year is 29.8%, higher than the Internet - Software industry’s projected rally of 9.3%. The stock has outperformed the broader industry over the past year (+16.7% vs -1.3%).
Fidelity National Information Services, Inc. FIS operates as a financial services technology company in the United States. Fidelity, in fact, has strengthened its position in the financial and payments solutions business, primarily based on its superior product portfolio and digitization.
The company displays an impressive earnings surprise history, having surpassed the Zacks Consensus Estimate in three of the trailing four quarters. Fidelity has a Zacks Rank #3. The company’s expected earnings growth rate for the current year is 14.7%, higher than the Financial Transaction Services industry’s projected rally of 9.7%. The stock has outperformed the broader industry over the past year (+19.8% vs +14.1%).
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