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Grab These 2 Consumer Discretionary Stocks on September Rate Cut Hope
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Investors across the world are eagerly waiting for a possible interest rate cut by the U.S. Fed in its September FOMC meeting. Expectations for a rate cut next month rose following Fed Chairman Jerome Powell’s speech at the Jackson Hole Economic Policy Symposium on Aug. 24. The release of several favorable economic data last week, further strengthened market participants’ confidence.
The CME Fedwatch tool is currently showing a 100% probability of a rate cut of 25 basis points each in the last three FOMC meetings this year, namely, September, November and December. A low-interest rate regime will benefit growth sectors such as technology and consumer discretionary.
At this stage, investment in consumer discretionary stocks with a favorable Zacks Rank, solid earnings estimate revisions and potential for strong price appreciation should bear fruit. Two such large-cap stocks are - Royal Caribbean Cruises Ltd. (RCL - Free Report) and Paramount Global (PARAA - Free Report) . Each of our picks currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Favorable Economic Data
The Department of Commerce reported in its second estimate that the U.S. economy grew 3% in second-quarter 2024 compared with the previous estimate of 2.8%. Consumer spending — the largest component of the GDP — accelerated at a 2.9% pace for the period.
The personal consumption expenditure price index (PCE Inflation) fell 2.5% year over year in the second quarter from 2.6% reported earlier. Core PCE inflation (excluding volatile food and energy items) — Fed’s favorite inflation gauge — dropped to 2.8% year over year from 2.9% reported earlier.
In July 2024, PCE inflation rose 2.5% year over year, inline with the consensus estimate. The core PCE inflation rose 2.6% year over year, below the consensus estimate of 2.7%. Personal income increased 0.3% sequentially. Consumer spending increased 0.5% sequentially even though the personal savings rate fell to 2.9%, its lowest since June 2022.
The University of Michigan reported that the consumer sentiment index rose to 67.9% in August from 66.4% in July. The index for current economic conditions decreased to 61.3% in August from 62.7% in July. The index of consumer expectations increased to 72.1% in August from 68.8% in July. Consumers expect inflation over the next year to slip to a 2.8% rate, the lowest outlook since December 2020.
The Conference Board reported that the consumer confidence index rose to 103.3% in August from an upwardly revised 101.9% in July. The present situation index increased to 134.4% in August from 133.1% in July. The expectations index improved to 82.5% in August from 81.1% in July. The average 12-month inflation expectation dropped to 4.9% in August — the lowest since March 2020.
Earnings Estimates for RCL on the Rise
Royal Caribbean Cruises posted impressive second-quarter 2024 results, with earnings and revenues beating the Zacks Consensus Estimate. RCL has been benefiting from strong cruising demand from new and loyal guests and robust booking trends. Also, strength in consumer spending onboard and pre-cruise purchases bodes well.
RCL emphasized investing in a modern digital travel platform to streamline the vacation booking process for customers and expand wallet share. Moreover, RCL emphasized new innovative ships and onboard experiences to boost its offering and deliver superior yields and margins.
Royal Caribbean Cruises has an expected revenue and earnings growth rate of 18.1% and 69.9%, respectively, for the current year. The stock has seen positive earnings estimate revisions for the current quarter, current year and next year in the last 30 days.
Image Source: Zacks Investment Research
Strong Price Upside for RCL Shares
Year to date, RCL provided a return of 27.1%. Despite this, the average price target of brokerage firms represents an increase of 11.6% from the last closing price of $164.62. The brokerage target price is currently in the range of $154-$210.
Image Source: Zacks Investment Research
Solid Earnings Estimate Revisions for PARAA Stock
Paramount Global operates as a media, streaming, and entertainment company worldwide. PARAA operates through TV Media, Direct-to-Consumer, and Filmed Entertainment segments. PARAA’s portfolio of consumer brands includes CBS, Showtime Networks, Paramount Pictures, Nickelodeon, MTV, Comedy Central, BET, Paramount, Pluto TV and Simon & Schuster, among others.
Paramount Global has an expected revenue and earnings growth rate of 0.2% and more than 100%, respectively, for the current year. The Zacks Consensus Estimate for current-quarter, next-quarter, current-year and next-year earnings has improved over the last 30 days.
Image Source: Zacks Investment Research
Impressive Price Upside for PARAA Shares
Year to date, the price of PARAA advanced 12.8%, underperforming the S&P 500’s return of 18.7%. Nevertheless, the average price target of brokerage firms represents an increase of 12.6% from the last closing price of $22.17. The brokerage target price is currently in the range of $25-$25.
Image Source: Zacks Investment Research
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Grab These 2 Consumer Discretionary Stocks on September Rate Cut Hope
Investors across the world are eagerly waiting for a possible interest rate cut by the U.S. Fed in its September FOMC meeting. Expectations for a rate cut next month rose following Fed Chairman Jerome Powell’s speech at the Jackson Hole Economic Policy Symposium on Aug. 24. The release of several favorable economic data last week, further strengthened market participants’ confidence.
The CME Fedwatch tool is currently showing a 100% probability of a rate cut of 25 basis points each in the last three FOMC meetings this year, namely, September, November and December. A low-interest rate regime will benefit growth sectors such as technology and consumer discretionary.
At this stage, investment in consumer discretionary stocks with a favorable Zacks Rank, solid earnings estimate revisions and potential for strong price appreciation should bear fruit. Two such large-cap stocks are - Royal Caribbean Cruises Ltd. (RCL - Free Report) and Paramount Global (PARAA - Free Report) . Each of our picks currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Favorable Economic Data
The Department of Commerce reported in its second estimate that the U.S. economy grew 3% in second-quarter 2024 compared with the previous estimate of 2.8%. Consumer spending — the largest component of the GDP — accelerated at a 2.9% pace for the period.
The personal consumption expenditure price index (PCE Inflation) fell 2.5% year over year in the second quarter from 2.6% reported earlier. Core PCE inflation (excluding volatile food and energy items) — Fed’s favorite inflation gauge — dropped to 2.8% year over year from 2.9% reported earlier.
In July 2024, PCE inflation rose 2.5% year over year, inline with the consensus estimate. The core PCE inflation rose 2.6% year over year, below the consensus estimate of 2.7%. Personal income increased 0.3% sequentially. Consumer spending increased 0.5% sequentially even though the personal savings rate fell to 2.9%, its lowest since June 2022.
The University of Michigan reported that the consumer sentiment index rose to 67.9% in August from 66.4% in July. The index for current economic conditions decreased to 61.3% in August from 62.7% in July. The index of consumer expectations increased to 72.1% in August from 68.8% in July. Consumers expect inflation over the next year to slip to a 2.8% rate, the lowest outlook since December 2020.
The Conference Board reported that the consumer confidence index rose to 103.3% in August from an upwardly revised 101.9% in July. The present situation index increased to 134.4% in August from 133.1% in July. The expectations index improved to 82.5% in August from 81.1% in July. The average 12-month inflation expectation dropped to 4.9% in August — the lowest since March 2020.
Earnings Estimates for RCL on the Rise
Royal Caribbean Cruises posted impressive second-quarter 2024 results, with earnings and revenues beating the Zacks Consensus Estimate. RCL has been benefiting from strong cruising demand from new and loyal guests and robust booking trends. Also, strength in consumer spending onboard and pre-cruise purchases bodes well.
RCL emphasized investing in a modern digital travel platform to streamline the vacation booking process for customers and expand wallet share. Moreover, RCL emphasized new innovative ships and onboard experiences to boost its offering and deliver superior yields and margins.
Royal Caribbean Cruises has an expected revenue and earnings growth rate of 18.1% and 69.9%, respectively, for the current year. The stock has seen positive earnings estimate revisions for the current quarter, current year and next year in the last 30 days.
Image Source: Zacks Investment Research
Strong Price Upside for RCL Shares
Year to date, RCL provided a return of 27.1%. Despite this, the average price target of brokerage firms represents an increase of 11.6% from the last closing price of $164.62. The brokerage target price is currently in the range of $154-$210.
Image Source: Zacks Investment Research
Solid Earnings Estimate Revisions for PARAA Stock
Paramount Global operates as a media, streaming, and entertainment company worldwide. PARAA operates through TV Media, Direct-to-Consumer, and Filmed Entertainment segments. PARAA’s portfolio of consumer brands includes CBS, Showtime Networks, Paramount Pictures, Nickelodeon, MTV, Comedy Central, BET, Paramount, Pluto TV and Simon & Schuster, among others.
Paramount Global has an expected revenue and earnings growth rate of 0.2% and more than 100%, respectively, for the current year. The Zacks Consensus Estimate for current-quarter, next-quarter, current-year and next-year earnings has improved over the last 30 days.
Image Source: Zacks Investment Research
Impressive Price Upside for PARAA Shares
Year to date, the price of PARAA advanced 12.8%, underperforming the S&P 500’s return of 18.7%. Nevertheless, the average price target of brokerage firms represents an increase of 12.6% from the last closing price of $22.17. The brokerage target price is currently in the range of $25-$25.
Image Source: Zacks Investment Research