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Recession Fears Fade on Dwindling Inflation: 5 Top Picks
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The Fed’s much-hyped soft landing of the U.S. economy seems to be a reality now. Steadily declining inflation, together with astonishing growth of U.S. GDP, has bolstered investors’ confidence in a soft landing.
On Nov 30, the Department of Commerce reported that the headline personal consumption expenditure (PCE) price index — remained flat month over month in October. The metric for September was revised downward to 0.3% from 0.4% reported earlier. Year over year, PCE inflation increased 3% in October compared with 3.4% in September.
Core (excluding volatile food and energy items) PCE inflation — the Fed’s most favorite inflation gauge — rose 0.2% month over month in October compared with 0.3% in the prior month. Year over year, core PCE inflation increased 3.5% in October compared with 3.7% in September.
A majority of market participants are confident that the Fed has already completed its interest rate hike regime. The CME FedWatch is currently showing a 95% probability that the central bank will keep the benchmark interest rate unchanged at 5.25-5.5%.
The resilient labor market has shown signs of cracks. The nonfarm payrolls in October were lower than expected. Moreover, weekly jobless claims have started increasing in the last few reported weeks. Continuing claims for the week ended Nov 23 jumped to its highest level since the week ended Nov 21, 2021.
On the other hand, the U.S. economy grew at an impressive 5.2% in third-quarter 2023. Personal spending increased 0.2% month over month in October. This clearly shows that a recession is out of sight at present.
Our Top Picks
We have narrowed our search to five growth stocks that have solid upside left for 2024. These stocks have witnessed positive earnings estimate revisions in the last 60 days. Each of our picks carries a Zacks Rank #1 (Strong Buy) and has a Growth Score A or B. You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performance of our five picks in the past month.
Image Source: Zacks Investment Research
The Progressive Corp. (PGR - Free Report) continues to gain on higher premiums, given its compelling product portfolio, leadership position and strength in both Vehicle and Property businesses. Focus on becoming a one-stop insurance destination, catering to customers opting for a combination of home and auto insurance, augurs well for PGR’s growth.
Policies in force and retention ratio should remain healthy for PGR. Competitive pricing to retain current customers and address customer needs with new offerings should continue to drive policy life expectancy.
The Progressive has an expected revenue and earnings growth rate of 13.2% and 49.1%, respectively, for next year. The Zacks Consensus Estimate for next-year earnings has improved 0.1% over the last seven days.
Pinterest Inc. (PINS - Free Report) is making solid progress in deepening user engagement on the platform. Focus on improving operational rigor and integration of cutting-edge AI models will likely boost relevancy and personalization. The corporate strategy to introduce more actionable content on the platform from a wide range of sources has resulted in healthy growth in engagement metrics across all regions.
PINS’ mobile deep linking product is helping retailers make more purchases through their mobile apps. PINS has significantly propelled shopping ads revenue growth. Advanced tools such as Travel Catalog and Premier Spotlight empower advertisers to reach target audiences with greater precision.
Pinterest has an expected revenue and earnings growth rate of 16.8% and 18.6%, respectively, for next year. The Zacks Consensus Estimate for next-year earnings has improved 4.1% over the last 30 days.
Lamb Weston Holdings Inc. (LW - Free Report) benefits from solid pricing actions to counter input and manufacturing cost inflation. Strategic pricing efforts drove LW’s first-quarter fiscal 2024 net sales, which increased year over year and surpassed the Zacks Consensus Estimate. Management is on track with solid offerings and capacity expansion, enabling the company to meet rising demand conditions for snacks and fries effectively.
LW continues investing in supply-chain, commercial and information technology operations. A solid start to the year and the ongoing demand and pricing scenario prompted LW to raise its fiscal 2024 outlook.
Lamb Weston has an expected revenue and earnings growth rate of 28.3% and 24.8%, respectively, for the current year (ending May 2024). The Zacks Consensus Estimate for current-year earnings has improved 10.8% over the last 60 days.
Palantir Technologies Inc. (PLTR - Free Report) builds and deploys software platforms for the intelligence community in the United States to assist in counterterrorism investigations and operations. PLTR provides Palantir Gotham, a software platform that enables users to identify patterns hidden deep within datasets, ranging from signals intelligence sources to reports from confidential informants.
Palantir Technologies has an expected revenue and earnings growth rate of 20.4% and 18.5%, respectively, for next year. The Zacks Consensus Estimate for next-year earnings has improved 7.4% over the last 30 days.
Vertiv Holdings Co. (VRT - Free Report) designs, manufactures, and services critical digital infrastructure technologies and life cycle services for data centers, communication networks, and commercial and industrial environments in the Americas, the Asia Pacific, Europe, the Middle East, and Africa. VRT offers hardware, software, analytics and ongoing services.
Vertiv Holdings has an expected revenue and earnings growth rate of 9% and 27.9%, respectively, for next year. The Zacks Consensus Estimate for current-year earnings has improved 11.7% over the last 60 days.
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Recession Fears Fade on Dwindling Inflation: 5 Top Picks
The Fed’s much-hyped soft landing of the U.S. economy seems to be a reality now. Steadily declining inflation, together with astonishing growth of U.S. GDP, has bolstered investors’ confidence in a soft landing.
On Nov 30, the Department of Commerce reported that the headline personal consumption expenditure (PCE) price index — remained flat month over month in October. The metric for September was revised downward to 0.3% from 0.4% reported earlier. Year over year, PCE inflation increased 3% in October compared with 3.4% in September.
Core (excluding volatile food and energy items) PCE inflation — the Fed’s most favorite inflation gauge — rose 0.2% month over month in October compared with 0.3% in the prior month. Year over year, core PCE inflation increased 3.5% in October compared with 3.7% in September.
A majority of market participants are confident that the Fed has already completed its interest rate hike regime. The CME FedWatch is currently showing a 95% probability that the central bank will keep the benchmark interest rate unchanged at 5.25-5.5%.
The resilient labor market has shown signs of cracks. The nonfarm payrolls in October were lower than expected. Moreover, weekly jobless claims have started increasing in the last few reported weeks. Continuing claims for the week ended Nov 23 jumped to its highest level since the week ended Nov 21, 2021.
On the other hand, the U.S. economy grew at an impressive 5.2% in third-quarter 2023. Personal spending increased 0.2% month over month in October. This clearly shows that a recession is out of sight at present.
Our Top Picks
We have narrowed our search to five growth stocks that have solid upside left for 2024. These stocks have witnessed positive earnings estimate revisions in the last 60 days. Each of our picks carries a Zacks Rank #1 (Strong Buy) and has a Growth Score A or B. You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performance of our five picks in the past month.
Image Source: Zacks Investment Research
The Progressive Corp. (PGR - Free Report) continues to gain on higher premiums, given its compelling product portfolio, leadership position and strength in both Vehicle and Property businesses. Focus on becoming a one-stop insurance destination, catering to customers opting for a combination of home and auto insurance, augurs well for PGR’s growth.
Policies in force and retention ratio should remain healthy for PGR. Competitive pricing to retain current customers and address customer needs with new offerings should continue to drive policy life expectancy.
The Progressive has an expected revenue and earnings growth rate of 13.2% and 49.1%, respectively, for next year. The Zacks Consensus Estimate for next-year earnings has improved 0.1% over the last seven days.
Pinterest Inc. (PINS - Free Report) is making solid progress in deepening user engagement on the platform. Focus on improving operational rigor and integration of cutting-edge AI models will likely boost relevancy and personalization. The corporate strategy to introduce more actionable content on the platform from a wide range of sources has resulted in healthy growth in engagement metrics across all regions.
PINS’ mobile deep linking product is helping retailers make more purchases through their mobile apps. PINS has significantly propelled shopping ads revenue growth. Advanced tools such as Travel Catalog and Premier Spotlight empower advertisers to reach target audiences with greater precision.
Pinterest has an expected revenue and earnings growth rate of 16.8% and 18.6%, respectively, for next year. The Zacks Consensus Estimate for next-year earnings has improved 4.1% over the last 30 days.
Lamb Weston Holdings Inc. (LW - Free Report) benefits from solid pricing actions to counter input and manufacturing cost inflation. Strategic pricing efforts drove LW’s first-quarter fiscal 2024 net sales, which increased year over year and surpassed the Zacks Consensus Estimate. Management is on track with solid offerings and capacity expansion, enabling the company to meet rising demand conditions for snacks and fries effectively.
LW continues investing in supply-chain, commercial and information technology operations. A solid start to the year and the ongoing demand and pricing scenario prompted LW to raise its fiscal 2024 outlook.
Lamb Weston has an expected revenue and earnings growth rate of 28.3% and 24.8%, respectively, for the current year (ending May 2024). The Zacks Consensus Estimate for current-year earnings has improved 10.8% over the last 60 days.
Palantir Technologies Inc. (PLTR - Free Report) builds and deploys software platforms for the intelligence community in the United States to assist in counterterrorism investigations and operations. PLTR provides Palantir Gotham, a software platform that enables users to identify patterns hidden deep within datasets, ranging from signals intelligence sources to reports from confidential informants.
Palantir Technologies has an expected revenue and earnings growth rate of 20.4% and 18.5%, respectively, for next year. The Zacks Consensus Estimate for next-year earnings has improved 7.4% over the last 30 days.
Vertiv Holdings Co. (VRT - Free Report) designs, manufactures, and services critical digital infrastructure technologies and life cycle services for data centers, communication networks, and commercial and industrial environments in the Americas, the Asia Pacific, Europe, the Middle East, and Africa. VRT offers hardware, software, analytics and ongoing services.
Vertiv Holdings has an expected revenue and earnings growth rate of 9% and 27.9%, respectively, for next year. The Zacks Consensus Estimate for current-year earnings has improved 11.7% over the last 60 days.