Consumer confidence – a key determinant of the economy’s health – improved significantly this June, somewhat suggesting that the U.S. economy is well placed against the Greek issue that has been affecting markets in recent months. However, Greece has defaulted on its 1.6 billion euro loan repayment to the International Monetary Fund, raising doubts that it may lead to the country's exit from the euro currency bloc. Though worried about the global financial health, analysts hinted that the U.S. economy may withstand the jolt.
According to recent Conference Board data, the Consumer Confidence Index increased to 101.4 in June from May’s reading of 94.6. A gradual recovery in the housing market as well as the manufacturing sector coupled with an improving labor market played major roles in raising buyers’ confidence. These indicate that the economy is gaining traction. We expect this positive sentiment to propel consumer spending, which accounts for over two-thirds of U.S. economic activity.
As many as 280,000 jobs were created in June, and the unemployment rate is hovering around 5.5%, according to the Bureau of Labor Statistics. The economy is gaining momentum, as evident from the May retail sales data released by the Commerce Department. Retail sales increased 1.2%, significantly higher than April’s revised gain of 0.2%.
Nonetheless, the “third and final” data for real GDP unveils that the economy did halt, contracting 0.2% in the first quarter of 2015, but faring better than the 0.7% decline projected earlier and the 2.1% fall witnessed in the first quarter of 2014. The positive revision in GDP numbers reflects better consumer spending (+2.1% vs. +1.8%), increase in investment in intellectual property products (+4.9% vs. +3.6%) and lower decline in non-residential fixed investments (-2% vs. -2.8%).
Experts believe that with temporary factors – such as inclement weather and port disruption that hampered economic growth – taking a backseat, the recovery looks convincing, although it may have to endure a stronger dollar for some time. Market pundits are now anticipating GDP growth of 2% or more for the April–June quarter, and expect the number to improve in the second half of the year.
With an expected rebound in the economy, declining unemployment rate, cheap gasoline prices, higher consumer confidence and improving consumer spending, the retail space is bubbling with optimism. Here we have highlighted 3 favorably ranked stocks, ready to ride on the back of confidence exuded by consumers.
Prominent Picks
G-III Apparel Group, Ltd. GIII, manufacturer and marketer of women’s and men’s apparel, is a solid bet. The stock sports a Zacks Rank #1 (Strong Buy) and has surged roughly 41% year to date. Based in New York, G-III Apparel delivered an average positive earnings surprise of 53.8% over the trailing four quarters, and has a long-term earnings growth rate of 18.5%.
The company is expected to witness earnings growth of 21.7% in fiscal 2016 and 18% in fiscal 2017. Further, the Zacks Consensus Estimate has been showing an uptrend over the past 30 days.
We also suggest investing in Boot Barn Holdings, Inc. BOOT, a lifestyle retail company. This Zacks Rank #1 stock has amassed a year-to-date return of about 78.4% and has a long-term earnings growth rate of 21%. The Irvine, CA-based company has delivered positive earnings beat in the trailing three quarters. It is expected to witness earnings growth of 13.2% in fiscal 2016 and 32% in fiscal 2017. The Zacks Consensus Estimate too has moved up over the past 60 days.
Another Zacks Rank #2 stock that investors may look forward to is Columbia Sportswear Company COLM. This designer, marketer, and distributor of outdoor and active lifestyle apparel, footwear and accessories, has advanced approximately 37% so far this year. An average positive earnings surprise of 17% over the trailing four quarters and a long-term earnings growth rate of 11.5% make this Portland, OR player quite an attractive investment option.
The company is expected to witness earnings growth of 8.6% in 2015 and 13.8% in 2016. The Zacks Consensus Estimate too has trended upward over the past 90 days.
Bottom Line
Investors can confidently end their search at stocks with a better Zacks Rank status of either #1 or #2, which encompasses its strong fundamentals, promises price movement and highlights analysts’ constructive view on the same via positive estimate revisions. A sturdy portfolio always gives favorable returns.
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 >>
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
Be the first to comment