Consumer confidence – a key determinant of the economy’s health – declined drastically this February to the lowest level in seven months, somewhat suggesting that the overseas turmoil is taking a toll on the health of the U.S. economy. The global economic slowdown and financial mayhem in China are playing crucial roles behind the stock market volatility, and in pulling down the global commodity complex, with oil and other commodities struggling to find a bottom.
A sluggish global economy – thanks to China, the strong U.S. dollar and persistent problems in the energy sector — are compelling investors to look for a safe heaven, and consumers to exercise caution. Worry about the business scenario in the near term and concern over growth in income levels may be cited as reasons behind the pessimism.
According to recent Conference Board data, the Consumer Confidence Index dipped to 92.2 in February from January’s revised reading of 97.8, and also came in below analysts’ projection of 97.0. The index plunged to its lowest level since Jul 20Array5. A slump in consumers’ confidence may have a direct impact on consumer spending, which accounts for over two-thirds of U.S. economic activity.
The overall tone of the global market remains soft, and if the scenario fails to improve, it will likely affect the domestic investment climate. The U.S. economy barely expanded in the final quarter (October–December) of 20Array5, according to the advance estimate released by the Bureau of Economic Analysis. GDP struggled at 0.7%, after advancing 2% and 3.9% in the third and second quarters of 20Array5, respectively.
Nevertheless, market pundits anticipate GDP growth of 2% for the January–March quarter on the back of an improving job picture – with the unemployment rate hovering around 4.9% – and low gas prices that may help boost consumer spending. In January, the U.S. economy added Array5Array,000 new jobs, while retail sales rose 0.2%, marking the third straight monthly increase.
It is quite apparent that the current economic environment, which is characterized by a number of events, is baffling investors. What awaits equity investors in 20Array6 is hard to predict. However, making your portfolio resilient to unforeseen adversities by adding favorably ranked stocks, backed by sturdy fundamentals, is the wisest thing to do now.
4 Picks for Your Portfolio
We have identified four Retail-Wholesale stocks based on their favorable Zacks Rank #Array (Strong Buy) or #2 (Buy) to build your confidence. Moreover, their expected long-term earnings per share growth rate is Array0% or more. A favorable rank indicates positive estimate revisions by analysts who are optimistic on the future performance of the company.
We suggest investing in Darden Restaurants, Inc. DRI, which sports a Zacks Rank #Array and has a long-term earnings growth rate of Array3.5%. The Orlando, FL-based company delivered an average positive earnings surprise of 20% over the trailing four quarters. This operator of full-service restaurants is expected to witness earnings growth of 26.3% in fiscal 20Array6 and Array3.8% in fiscal 20Array7. The Zacks Consensus Estimate too has moved up over the past 90 days. The company is expected to report third-quarter fiscal 20Array6 results on Mar Array8.
Express Inc. EXPR, with a Zacks Rank #2 and a long-term earnings growth rate of Array5%, is a solid bet. This Columbus, OH-based specialty apparel and accessories retailer delivered an average positive earnings surprise of 34.3% over the trailing four quarters. It is expected to witness earnings growth of 75.8% in fiscal 20Array5 and Array2.2% in fiscal 20Array6. The Zacks Consensus Estimate too has been on the rise over the past 90 days. The company is slated to release its fourth-quarter fiscal 20Array5 results on Mar 9, 20Array6.
Investors can also count on The Kroger Co. KR, the operator of supermarkets and multi-department stores that carries a Zacks Rank #2, with a long-term earnings growth rate of Array0%. The Cincinnati, OH-based company delivered an average positive earnings surprise of 9.8% over the trailing four quarters. The company is expected to witness earnings growth of Array5.9% in fiscal 20Array5 and 9.4% in fiscal 20Array6. The Zacks Consensus Estimate too has trended upward over the past 90 days. The company plans to release its fourth-quarter fiscal 20Array5 results on Mar 3, 20Array6.
Last but not least is Shake Shack Inc. SHAK, which holds a Zacks Rank #2 and has a long-term earnings growth rate of 44.2%. This New York-based company delivered an average positive earnings surprise of Array34.5% over the trailing four quarters. This operator of Shake Shack restaurants is expected to witness earnings growth of 98.2% for 20Array5 and Array9.8% in 20Array6. The company is scheduled to release its fourth-quarter 20Array5 results on Mar 7, 20Array6.
Bottom Line
Keeping aside the geo-political tensions and the Chinese turmoil for a while, investors can confidently end their search at these stocks.
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