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Inflation started showing signs of decline in April and the downward movement has since continued. The Labor Department reported on Jul 11 that the monthly inflation rate fell in June for the first time in four years.
The consumer price index (CPI), a broad measure of prices for goods and services across the economy, fell 0.1% month over month in June, after remaining unchanged in May and the first decline since May 2020.
Year over year, CPI rose 3% in June after rising 3.3% in May, recording the smallest increase since June 2023. The June figures also beat the consensus estimate of a 0.1% monthly and a 3.1% year-over-year increase.
Core CPI, which excludes the volatile food and energy costs, rose 0.1% sequentially in June and 3.3% from the year-ago levels, beating the consensus estimate of a rise of 0.2% and 3.4% respectively. The year-over-year rise in core CPI was the smallest since April 2021.
June’s drop in inflation was driven by a sharp decline in gasoline prices, which fell 3.8% in June after falling 3.6% in the prior month. Shelter and food costs each rose at a moderate pace of 0.2%.
Inflation rose in the first quarter igniting fears that the Federal Reserve could continue with its monetary tightening policy for a longer period even after hiking interest rates by 525 basis points since March 2022.
However, in a big sigh of relief for both consumers and the Federal Reserve, inflation declined in the second quarter. Inflation has now fallen to a third from its peak of 9.1% in June 2022 to 3% in June 2024.
The sharp decline over the past couple of years is likely to draw the Federal Reserve another step closer to cutting interest rates in September. The Federal Reserve had earlier projected three rate cuts in 2024 but now sees only one.
However, even a single 25 basis point interest rate cut has been positively received, especially since many in the market had anticipated no rate cuts in 2024.
Moreover, the latest FOMC "dot plot," suggests a planned cumulative reduction of 1% in interest rates by 2025, potentially taking the Fed funds rate down to 4.1% by the end of next year. Currently, markets are pricing a rate cut in September, with the possibility of another before the year-end if inflation continues to decline sharply.
Our Choices
Given this scenario, we have narrowed our search to four consumer discretionary stocks, such as YETI Holdings, Inc. (YETI - Free Report) , The Toro Company (TTC - Free Report) , Skechers U.S.A., Inc. (SKX - Free Report) , Royal Caribbean Cruises Ltd. (RCL - Free Report) and Norwegian Cruise Line Holdings Ltd. (NCLH - Free Report) ,which have strong potential for 2024. These stocks have seen positive earnings estimate revisions in the last 60 days. Each of the stocks has a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
YETI Holdings, Inc. designs, markets and distributes products for the outdoor and recreation market under YETI brand primarily in the United States. YETI’s products are designed for use in outdoor activities, including recreational and professional pursuits targeting various categories, including hunting, fishing, camping, barbecue, farm and ranch activities and others.
YETI Holdings’expected earnings growth rate for the current year is 15.1%. The Zacks Consensus Estimate for current-year earnings has improved 0.8% over the past 60 days. YETI carries a Zacks Rank #2 at present.
The Toro Company is a leading worldwide provider of innovative solutions for the outdoor environment, including turf, snow and ground engaging equipment and irrigation and outdoor lighting solutions. TTC’s global presence extends to more than 90 countries.
The Toro Company’s expected earnings growth rate for the current year is 2.9%. The Zacks Consensus Estimate for current-year earnings has improved 0.7% over the past 60 days. TTC presently carries a Zacks Rank #2.
Skechers U.S.A., Inc. designs, develops, markets and distributes footwear for men, women and children in the United States and overseas under the SKECHERS name, as well as under several uniquely branded names. SKX has distribution networks and joint venture partners in Asia and the Middle East, and wholly-owned subsidiaries in Canada, Japan, throughout Europe and Latin America.
Skechers U.S.A.’s expected earnings growth rate for the current year is 16.9%. The Zacks Consensus Estimate for current-year earnings has improved 1.5% over the past 60 days. SKX presently carries a Zacks Rank #2.
Royal Caribbean Cruises Ltd. owns and operates three global brands — Royal Caribbean International, Celebrity Cruises and Azamara Club Cruises. Additionally, RCL has a 50% investment in a joint venture with TUI AG, which operates the brand TUI Cruises. Royal Caribbean Cruises’ cruise brands primarily serve the contemporary, premium and deluxe segments of the cruise vacation industry, which also includes the budget and luxury segments.
Royal Caribbean Cruises’ expected earnings growth rate for the current year is 64%. The Zacks Consensus Estimate for current-year earnings has improved 1.3% over the past 60 days. RCL currently carries a Zacks Rank #2.
Norwegian Cruise Line Holdings Ltd. is a leading cruise line operator. NCLH owns and operates three brands — Oceania Cruises, Regent Seven Seas Cruises and Norwegian Cruise Line.
Norwegian Cruise Line Holdings’ expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 5.9% over the past 60 days. NCLH presently has a Zacks Rank #2.
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Inflation Declines, Raising Interest Rate Cut Hopes: 5 Winners
Inflation started showing signs of decline in April and the downward movement has since continued. The Labor Department reported on Jul 11 that the monthly inflation rate fell in June for the first time in four years.
The consumer price index (CPI), a broad measure of prices for goods and services across the economy, fell 0.1% month over month in June, after remaining unchanged in May and the first decline since May 2020.
Year over year, CPI rose 3% in June after rising 3.3% in May, recording the smallest increase since June 2023. The June figures also beat the consensus estimate of a 0.1% monthly and a 3.1% year-over-year increase.
Core CPI, which excludes the volatile food and energy costs, rose 0.1% sequentially in June and 3.3% from the year-ago levels, beating the consensus estimate of a rise of 0.2% and 3.4% respectively. The year-over-year rise in core CPI was the smallest since April 2021.
June’s drop in inflation was driven by a sharp decline in gasoline prices, which fell 3.8% in June after falling 3.6% in the prior month. Shelter and food costs each rose at a moderate pace of 0.2%.
Inflation rose in the first quarter igniting fears that the Federal Reserve could continue with its monetary tightening policy for a longer period even after hiking interest rates by 525 basis points since March 2022.
However, in a big sigh of relief for both consumers and the Federal Reserve, inflation declined in the second quarter. Inflation has now fallen to a third from its peak of 9.1% in June 2022 to 3% in June 2024.
The sharp decline over the past couple of years is likely to draw the Federal Reserve another step closer to cutting interest rates in September. The Federal Reserve had earlier projected three rate cuts in 2024 but now sees only one.
However, even a single 25 basis point interest rate cut has been positively received, especially since many in the market had anticipated no rate cuts in 2024.
Moreover, the latest FOMC "dot plot," suggests a planned cumulative reduction of 1% in interest rates by 2025, potentially taking the Fed funds rate down to 4.1% by the end of next year. Currently, markets are pricing a rate cut in September, with the possibility of another before the year-end if inflation continues to decline sharply.
Our Choices
Given this scenario, we have narrowed our search to four consumer discretionary stocks, such as YETI Holdings, Inc. (YETI - Free Report) , The Toro Company (TTC - Free Report) , Skechers U.S.A., Inc. (SKX - Free Report) , Royal Caribbean Cruises Ltd. (RCL - Free Report) and Norwegian Cruise Line Holdings Ltd. (NCLH - Free Report) ,which have strong potential for 2024. These stocks have seen positive earnings estimate revisions in the last 60 days. Each of the stocks has a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
YETI Holdings, Inc. designs, markets and distributes products for the outdoor and recreation market under YETI brand primarily in the United States. YETI’s products are designed for use in outdoor activities, including recreational and professional pursuits targeting various categories, including hunting, fishing, camping, barbecue, farm and ranch activities and others.
YETI Holdings’expected earnings growth rate for the current year is 15.1%. The Zacks Consensus Estimate for current-year earnings has improved 0.8% over the past 60 days. YETI carries a Zacks Rank #2 at present.
The Toro Company is a leading worldwide provider of innovative solutions for the outdoor environment, including turf, snow and ground engaging equipment and irrigation and outdoor lighting solutions. TTC’s global presence extends to more than 90 countries.
The Toro Company’s expected earnings growth rate for the current year is 2.9%. The Zacks Consensus Estimate for current-year earnings has improved 0.7% over the past 60 days. TTC presently carries a Zacks Rank #2.
Skechers U.S.A., Inc. designs, develops, markets and distributes footwear for men, women and children in the United States and overseas under the SKECHERS name, as well as under several uniquely branded names. SKX has distribution networks and joint venture partners in Asia and the Middle East, and wholly-owned subsidiaries in Canada, Japan, throughout Europe and Latin America.
Skechers U.S.A.’s expected earnings growth rate for the current year is 16.9%. The Zacks Consensus Estimate for current-year earnings has improved 1.5% over the past 60 days. SKX presently carries a Zacks Rank #2.
Royal Caribbean Cruises Ltd. owns and operates three global brands — Royal Caribbean International, Celebrity Cruises and Azamara Club Cruises. Additionally, RCL has a 50% investment in a joint venture with TUI AG, which operates the brand TUI Cruises. Royal Caribbean Cruises’ cruise brands primarily serve the contemporary, premium and deluxe segments of the cruise vacation industry, which also includes the budget and luxury segments.
Royal Caribbean Cruises’ expected earnings growth rate for the current year is 64%. The Zacks Consensus Estimate for current-year earnings has improved 1.3% over the past 60 days. RCL currently carries a Zacks Rank #2.
Norwegian Cruise Line Holdings Ltd. is a leading cruise line operator. NCLH owns and operates three brands — Oceania Cruises, Regent Seven Seas Cruises and Norwegian Cruise Line.
Norwegian Cruise Line Holdings’ expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 5.9% over the past 60 days. NCLH presently has a Zacks Rank #2.