U.S. Markets close in 1 hr 51 mins

The Zacks Analyst Blog Highlights: SeaWorld Entertainment, Rent-A-Center, Callaway Golf, BJ's Wholesale Club and Lululemon Athletica

Zacks Equity Research

For Immediate Release

Chicago, IL – July 31, 2019 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: SeaWorld Entertainment, Inc. SEAS, Rent-A-Center, Inc. RCII, Callaway Golf Company ELY, BJ's Wholesale Club Holdings, Inc. BJ and Lululemon Athletica LULU.

Here are highlights from Tuesday’s Analyst Blog:

5 Consumer Discretionary Stocks to Buy Ahead of Q2 Earnings

While considerably lower than the pace set in the preceding quarter, the advance estimate for second-quarter GDP largely exceeded expectations. Fresh data from the Department of Commerce set recessionary fears to rest. And this was largely possible due to a significant upsurge in consumer spending.

This factor alone was enough to partially negate the impact of a drastic slump in business investment which still managed to shave 1% off last quarter’s figure. Analysts believe that it will be difficult to sustain the pace of consumer spending going forward.

However, the economy is still likely to be sufficiently robust, gaining strength from a strong labor market. This is why it is a good idea to pick up select stocks from the sector that are likely to outperform their earnings estimates.

Consumer Spending Surge Outweighs Investment Slump

The decline in the pace of second-quarter GDP was attributable almost entirely to a fall in business investment. During this period, gross private domestic investment declined to 5.5%. This was the lowest rate recorded since the fourth quarter of 2015. Notably, expenditure on structures dropped 10.6%.

Happily, personal consumption expenditures jumped 4.3% in the second quarter. This was the highest increase experienced in six quarters. Consumer spending alone contributes nearly two-thirds of U.S. GDP. This is why the increase in consumer expenditure was enough to fuel GDP in the April-June period.

Analysts believe that consumer expenditure may not be able to grow at such a furious pace in the quarters ahead. At the same time, the job market remains robust and wage gains are flowing in steadily. These factors are likely to boost spending appreciably over the rest of the year as well as in 2020. (Read: Q2 GDP Beats Estimates on Strong Consumer Spending: 5 Picks)

Hiring Rebounds in June, Unemployment Close to 50-Year Low

The U.S. economy added 224,000 jobs in June, easily exceeding the consensus estimate of 161,000. However, May’s dismal hiring numbers were revised marginally downward, from 75,000 to 72,000. Also, at 172,000, average job additions for the first half of 2019 were lower than 223,000 registered last year.

However, the decline in job growth does not detract from the fact that the economy is continuing to create jobs at a steady pace so far into the expansion. Meanwhile, the unemployment rate inched up from 3.6% to 3.7% as 335,000 individuals joined the workforce, but remained close to a 50-year low. (Read: 5 Business Services Stocks to Buy as Job Gains Rebound)

Consumer Discretionary Space to Witness Higher Q2 Earnings

Earnings and revenue growth for sectors across the board are expected to decelerate appreciably in the second quarter. For the consumer discretionary sector, total Q1 earnings were up 1.6% on 12.6% higher revenues.

Happily as of Jul 26, total Q2 earnings for the sector are expected to be up 2.4% on 12.5% higher revenues. This actually represents an increase in pace, and is far better than basic materials, conglomerates and construction. Earnings growth for these sectors is set to decline 36.2%, 10.9% and 6.7%, respectively.

For the S&P 500 Index as a whole, total Q2 earnings are expected to be flat from the same period last year on 4.1% higher revenues.(Read: A Reassuring Earnings Picture)

Our Choices

The second-quarter GDP report clearly indicates that consumer spending remains in good shape. A robust economy, particularly a strong labor market, is boosting purchasing power significantly, which is continuing to fuel growth for the sector.

Earnings ESP is our proprietary methodology for identifying stocks that have high chances of surprising with their next earnings announcement. It shows the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

You could further narrow down the list of choices by looking at stocks that have a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.

Our research shows that for stocks with this combination, the chance of a positive earnings surprise is as high as 70%.

SeaWorld Entertainment, Inc. is a theme park and entertainment company operating primarily in the United States.

SeaWorld surpassed the Zacks Consensus Estimate for earnings in three of the last four consecutive quarters, with an average positive earnings surprise of 35.6%.

Powered with the right combination of the two key ingredients — an Earnings ESP of +11.01% and a Zacks Rank of 2 — our proven model shows that an earnings beat is expected for SeaWorld in the to-be-reported quarter as well.

The company is expected to report second-quarter 2019 results on Aug6.

Rent-A-Center, Inc. is the largest rent-to-own operator in the United States offering durable goods such as consumer electronics, appliances, computers, furniture and accessories.

Rent-A-Center surpassed the Zacks Consensus Estimate for earnings in the last four consecutive quarters, with an average positive earnings surprise of 73.9%.

The company’s Earnings ESP of +3.88% and Zacks Rank of 2, increase our predictive power of an earnings beat in the to-be-reported quarter as well.

The company is expected to report second-quarter 2019 results on Jul 23.

Callaway Golf Company is a designer, manufacturer and seller of golf clubs, golf balls, golf bags, and other golf-related accessories.

Callaway Golf beat the Zacks Consensus Estimate for earnings in the last four consecutive quarters, with an average positive earnings surprise of 7.7%.

Powered with the right combination of an Earnings ESP of +2.97% and a Zacks Rank of 1, our proven model shows that an earnings beat is expected for Callaway Golf in the to-be-reported quarter.

The company is expected to report second-quarter 2019 results on Aug 8.

BJ's Wholesale Club Holdings, Inc. is an operator of membership warehouse clubs primarily in the Eastern United States.

BJ's Wholesale Club beat the Zacks Consensus Estimate for earnings in the last four consecutive quarters, with an average positive earnings surprise of 13.9%.

The company’s Earnings ESP of +21.05% and Zacks Rank of 1 increase our predictive power of an earnings beat in the to-be-reported quarter.

BJ's Wholesale Club is expected to report second-quarter 2019 results on Aug 27.

Lululemon Athletica is a yoga-inspired athletic apparel company that creates lifestyle components.

Lululemonathletica beat the Zacks Consensus Estimate for earnings in the last four consecutive quarters, with an average positive earnings surprise of 16%.

Given an Earnings ESP of +0.97% and a Zacks Rank of 2, our proven model shows that an earnings beat is expected for lululemonathletica in the to-be-reported quarter as well.

The company is expected to report second-quarter 2019 results on Aug 29.

Today's Best Stocks from Zacks

Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2018, while the S&P 500 gained +15.8%, five of our screens returned +38.0%, +61.3%, +61.6%, +68.1%, and +98.3%.

This outperformance has not just been a recent phenomenon. From 2000 – 2018, while the S&P averaged +4.8% per year, our top strategies averaged up to +56.2% per year.

See their latest picks free >>

Media Contact

Zacks Investment Research

800-767-3771 ext. 9339

support@zacks.com                                   

https://www.zacks.com                                                 

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Rent-A-Center, Inc. (RCII) : Free Stock Analysis Report
 
Callaway Golf Company (ELY) : Free Stock Analysis Report
 
SeaWorld Entertainment, Inc. (SEAS) : Free Stock Analysis Report
 
lululemon athletica inc. (LULU) : Free Stock Analysis Report
 
BJ's Wholesale Club Holdings, Inc. (BJ) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.