For Immediate Release
Chicago, IL – November 17, 2022 – Zacks.com announces the list of stocks featured in the analyst blog. Every day, Zacks Equity Research analysts discuss the latest news and events affecting stocks and the financial markets. Stocks recently featured on the blog include: BJ’s Wholesale Club Holdings Inc. BJ, H&R Block Inc. HRB, Wyndham Hotels & Resorts Inc. WH, Live Nation Entertainment Inc. LYV, and Hyatt Hotels Corp. H.
Here are the highlights from Wednesday’s analyst blog:
Inflation peak behind us? 5 consumer discretionary picks
US stock markets have been staging an impressive rally since early October. We’re not out of the woods yet as inflation remains high. However, several recent data releases have clearly shown that inflation is falling, albeit slowly. A gradual decline in inflation should add to the ongoing rally in US stock markets.
To combat record-high inflation, the Fed has instituted ultra-hawkish monetary policy. The benchmark interest rate has risen by 3.75% so far in 2022 and the central bank’s liquidity-squeezing strategy has boosted the market’s risk-free yield. Growth sectors such as consumer discretionary and technology were the main sufferers of the Fed’s hawkish strategy.
As inflation peaks appear to be behind us, the Fed is likely to relax tighter monetary policy controls. This will help the consumer discretionary sector, which is down more than 30% year-to-date. We have selected five consumer discretionary stocks with a favorable Zacks rank for investment. These are – BJ’s Wholesale Club Holdings Inc., H&R Block Inc., Wyndham Hotels & Resorts Inc., Live Nation Entertainment Inc. and Hyatt Hotels Corp.
Peak inflation appears to be fading
On November 10, the Labor Department reported that the consumer price index (CPI) rose 0.4% mom and 7.7% yoy in October. The consensus estimate was for a 0.5% monthly increase and a 7.9% annual increase.
Core CPI (excluding volatile food & energy items) rose 0.3% mom and 6.3% year-on-year. The consensus estimate was for an increase of 0.5% m/m and 6.5% y/y.
On November 15, the Labor Department reported that the Producer Price Index (PPI) rose 0.2% in October, compared to the consensus estimate of a 0.5% rise. September data has been revised down to 0.2% from 0.4%.
Year-on-year, the PPI rose 8% and fell from 8.4% in September. The core PPI rose 0.2% in October compared to the consensus estimate of 0.4%. Year-on-year, the core PPI rose 5.4% in October.
In the third quarter of 2022, the chain-weighted price index — a consumer-adjusted index of the cost of living — rose 4.1%, well below the consensus estimate of 5.3%. The personal consumption expenditure (PCE) price index rose 4.2%, posting a sharp fall of 7.3% in the second quarter. The core PCE price index — the Fed’s preferred indicator of inflation — rose 4.5% in the third quarter, in line with market expectations.
Our top picks
We’ve narrowed our search to five consumer discretionary stocks that have strong potential for the remainder of 2022. These stocks have revised positive earnings estimates in the last 30 days. Each of our picks carries a Zacks Rank #2 (Buy). You can see the full list of today’s Zacks #1 Rank (Strong Buy) stocks can be found here.
BJ’s Wholesale Club‘s ability to weather the challenging retail environment validates its strong customer value proposition and business model. BJ’s relentless efforts to grow its membership base, simplify assortments, enhance digital capabilities and accelerate club openings should support sales. We expect a sustained improvement in dues revenue as new club openings increase.
Notably, by acquiring Burris Logistics’ perishables supply chain, BJ’s Wholesale Club puts the company in an advantageous position to expand supply chain capabilities and expand its fresh food offering. A 6% increase in membership in the second quarter speaks to BJ’s ability to grow traffic. We expect total revenue to increase by 14.3% and 7.1% in fiscal 2022 and 2023, respectively.
BJ’s Wholesale Club has an expected earnings growth rate of 12% for the year to date (to January 2023). The Zacks consensus estimate for the year to date is up 11.1% over the past seven days.
H&R block is well positioned to benefit from its five-year strategy known as Block Horizons. HRB is expected to deliver sustainable revenue, operating profit growth and healthy returns on capital employed while maintaining a strong balance sheet and cash position for the foreseeable future.
Key drivers of H&R Block’s post-pandemic performance will be digital enablement of the business, adding and retaining customers in both assisted and home improvement, greater use of AI and machine learning for product improvement and expansion in small businesses.
H&R Block has an expected earnings growth rate of 9.4% for the current fiscal year (until June 2023). The Zacks consensus estimate for the current fiscal year is up 10.5% over the past 30 days.
Live Nation Entertainment benefits from pent-up demand for live events and robust ticket sales. These, together with the increased demand for digital ticketing and contactless transactions, are likely to have contributed to the upward trend.
LYV remains bullish on its growth prospects in 2022 and 2023. The emphasis on cost-saving efforts bodes well. For concerts, Live Nation Entertainment said it has already sold more than 100 million tickets for shows in the second half of 2022 and 2023. LYV is likely to benefit from the acquisition by OCESA.
Live Nation Entertainment expects a revenue growth rate of more than 100% for the current year. The Zacks consensus estimate for the year to date is up 24.5% over the past 30 days.
Hyatt hotels has benefited from solid leisure demand, easing travel restrictions and increased airline capacity. The focus on new hotel openings and acquisition initiatives also bodes well.
As staff return to the office and more cross-border travel resumes, H remains optimistic about the business’ temporary recovery and its continued momentum in the second half of the year.
Hyatt Hotels expects an earnings growth rate of over 100% for the current year. The Zacks consensus estimate for the year to date is up 70.1% over the past 30 days.
Wyndham operates as a hotel franchisor primarily in Canada, Mexico, Colombia, Ecuador, Turkey, Germany, United Kingdom, the Caribbean and Margarita Island in Venezuela. WH operates in the hotel franchising and hotel management segments.
The Hotel Franchising segment licenses its lodging brands and provides related services to third-party hotel owners and others. The Hotel Management segment provides hotel management services for full-service and limited-service hotels.
Wyndham has a year-to-date earnings growth rate of 21.5%. The Zacks consensus estimate for the year to date is up 5.8% over the past 7 days.
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Hyatt Hotels Corporation (H): Free Stock Research Report
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