Despite worries over higher gas prices and interest rates that
are creeping higher, the U.S. consumer is forging ahead. Consumer
spending levels continue to increase, while confidence remains
rather high as well.
While there are likely a number of trends that are behind the
strong consumer, you have to believe that recent bullishness in
both the jobs and housing markets are helping immensely. New
claims continue to drop, while housing prices are on pace for
double digit (year-over-year) percentage gains too. Add this in
to a stock market at record highs, and you have a recipe for a
strong consumer that could still have room to run higher.
Given this, it might be a good idea to cycle towards consumer
stocks at the tail end of this earnings season. These stocks
remain well positioned in today's market environment, and could
see solid guidance as a result of the aforementioned trends.
How to choose?
Obviously, there are quite a few companies in the consumer
space, so it may be difficult to pick the right stock for your
portfolio. One way to narrow down the list of choices is by
looking at stocks that have a solid Zacks Rank, and a favorable
Zacks Earnings ESP (see
Zacks Earnings ESP: A Better Way to Find Earnings
This combination is usually a harbinger of an earnings beat,
so looking for this arrangement can be a formula for success in
this sluggish time of the market. For investors seeking to apply
this strategy to their portfolios, we have highlighted three
consumer stocks below which fit these criteria, and thus may be
big winners this earnings season:
Conn's is a specialty retailer that currently focuses in on
Texas and Louisiana. The focus of the business is on large
appliances like freezers, washers, and refrigerators, while the
company also sells consumer electronics and home office equipment
The firm is currently expecting superb earnings growth with
full year earnings growth expected to be above 60%. Analysts have
been moving their estimates higher for the firm lately too,
suggesting that good things could be ahead, even with these lofty
CONN currently has a Zacks Rank #2 (Buy) along with a 5.1%
ESP. The firm is expected to report earnings on September 4
GameStop is a Texas-based video game retailer, selling a
variety of new and pre-owned video game software and hardware.
The firm has over 6,600 stores, and it has international exposure
as well, operating in 15 nations around the globe.
Although there is some concern over growth rates, estimates
have largely been moving higher as of late, especially for full
year and then 2014 metrics. The most accurate-in other words most
recent estimates-have been moving higher, and with GME's solid
history at earnings season, the company could be well-positioned
this time around too.
GME has a Zacks Rank of 3 (Hold), while it has an enormous ESP
of 50%. The company looks to report earnings on August 22
Best Buy (
Arguably one of the most famous electronics retailers, Best
Buy has made a name for itself selling a variety of electronics
under one roof. The huge chain went through a very difficult
period recently, thanks to worries over competition, but there is
some hope that the company is on the right track now.
After all, shares of BBY have added over 50% in the trailing
one year time frame, and estimates have been trending higher for
the current year and next year periods. The firm has also shown a
solid track record at earnings season, while the most recent
estimate suggests that we could see another beat this quarter
from the embattled firm.
Best Buy has a Zacks Rank of 2 (Buy), while it has an ESP of
16.7%. The firm reports earnings on the 20
Thanks to the positive trends underpinning the consumer
recovery-such as a solid jobs market and price appreciation in
housing-it becomes pretty clear that the consumer sector is the
place to be. Given this, a look to the space for some possible
outperformers could be a great idea to finish off earnings
One way to do this is by looking at stocks that have a solid
Zacks Rank, and a positive Zacks Earnings ESP. Companies that
meet both of these criteria, such as the three outlined above,
could be well positioned to beat this earnings season, and give
investors solid gains to close out the summer.
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