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The Zacks Analyst Blog Highlights: CVS, RH, Groupon, Darden and Carrols


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For Immediate Release

Chicago, IL -July 18, 2018 - Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include CVS Health Corp. CVS , RH RH , Groupon, Inc. GRPN , Darden Restaurants, Inc. DRI and Carrols Restaurant Group, Inc. TAST .

Here are highlights from Tuesday's Analyst Blog:

Americans on a Spending Spree: Top 5 Gainers

Headline retail sales rose for the fifth successive month in June, with health & personal care stores, building materials and even online shopping seeing an uptick in sales. Sales at bars and restaurants surged during late spring to the highest level in about three years.

Such a burst of spending in spring after a ho-hum winter is primarily backed by Trump's tax cuts, strong hiring and declining unemployment rate. Solid consumer spending, in turn, cemented expectations for robust economic growth in the second quarter. Thus, it's time to invest in areas which are seeing ramped up spending by Americans.  

Americans Hit the Retail Scene Hard

Sales at U.S. retailers kept climbing in June after huge gains in May, highlighting the underlying strength of the economy amid escalating concerns over trade. U.S. retail sales rose 0.5% last month, which matched the expectations of economists. The sales uptick followed a revised 1.3% gain in May instead of an earlier reported 0.8%, according to the U.S. Census Bureau (read more: 5 Stocks En Vogue on a Broad Rise in US Retail Sales ).

Retail sales, by the way, ticked up 6.6% in the last 12 months, marginally above the long-run average since 1980. Retail sales were mostly broad-based, with gas stations notching a 1% increase last month. Other big gainers were health & personal care stores (2.2%) and online shopping (1.3%). Receipts at building materials stores, and restaurants and bars increased as well.

However, there were some declines at sporting goods stores (3.2%), clothing (2.5%) and department stores (1.8%). 

Sales at Bars & Restaurants Soar to a Nearly 3-Year High

Coming back to restaurants and bars, sales moved north both in May and June, propelling the yearly increase to an almost three-year high. Sales in places that sell food and drinks increased 8%, nearly four times faster compared to the same period a year earlier.

Chief economist Stephen Stanley of Amherst Pierpont Securities added that "the sales increase in the last two months for restaurants marks the best two-month run since 1994 and by more than a little." The restaurant hopping scene, further, confirms that the economy is in a pretty good shape. After all, consumers do go out to eat more often when they are financially sound.

The upward journey in restaurant outlays, in reality, started early in 2018, reflecting investors' ever increasing confidence in the economy. The consumer confidence index, in fact, had hit an 18-year high in February.

What Are the Catalysts Driving the Gains?

Recent tax cuts have helped put more money in consumers' pockets. The tax bill trimmed the ultra-rich individual tax bracket from 39.6% to 37%, while the middle class has been spared from paying hefty taxes.

Scores of people are also finding jobs, keeping the jobless rate at low levels and there are more jobs offered than workers available for hire. The United States has been able to create 213,000 jobs in June; a sign that corporates are finding ways to fill positions despite the lack of skilled workers. Such upbeat hiring figures breezed past analysts' estimates of 200,000 job additions.

Job gains were pretty broad-based, with white-collar jobs leading the way with 50,000 additions. From manufacturers, health-care providers to construction companies, all hired workers, a clear sign of a burgeoning economy.

The unemployment rate rose to 4% last month, but for a good reason. The jobless rate went up mostly because of around 600,000 people entering the labor force. This showed that more Americans are searching for jobs as they are easier to find.

5 Solid Choices

Taking the spending spree into account, retailers are set to witness a strong rally. Hence, it will be prudent to invest in five of the best retail stocks from the categories that have witnessed a significant rise in receipts. Such stocks have a Zacks Rank #1 (Strong Buy) or 2 (Buy).

CVS Health Corp. , together with its subsidiaries, provides integrated pharmacy health care services. Currently, the company has a Zacks Rank 2. In the last 60 days, one earnings estimate moved north, while none moved south for the current year. The Zacks Consensus Estimate for earnings rose 0.6% in the same period. The company's expected earnings growth rate for the current year is 18.5% compared with the Retail - Pharmacies and Drug Stores industry's estimated decline of 2.3%.

RH , together with its subsidiaries, operates as a retailer in home furnishings. The company sports a Zacks Rank 1. In the last 60 days, 11 earnings estimates moved north, while none moved south for the current year. The Zacks Consensus Estimate for earnings rose 12.5% in the same period. The company's expected earnings growth rate for the current year is 115.7% compared with the Retail - Home Furnishings industry's projected rally of 20.6%.

Groupon, Inc. operates online local commerce marketplaces that connect merchants to consumers by offering goods and services at a discount in North America and internationally. Currently, the company has a Zacks Rank 1. In the last 30 days, one earnings estimate moved north, while none moved south for the current year. The Zacks Consensus Estimate for earnings rose 4.3% in the same period.  The company's expected earnings growth rate for the current year is 118.2% compared with the Internet - Commerce industry's estimated rally of 11.1%. You can see  the complete list of today's Zacks #1 Rank stocks here .

Darden Restaurants, Inc. owns and operates full-service restaurants in the United States. Recently, the company has a Zacks Rank 2. In the last 60 days, 11 earnings estimates moved north, while one moved south for the current year. The Zacks Consensus Estimate for earnings increased 2% in the same period. The company's expected earnings growth rate for the current year is 14.1% compared with the Retail - Restaurants industry's estimated rally of 13.9%.

Carrols Restaurant Group, Inc. , through its subsidiaries, operates franchisee restaurants of Burger King. The company has a Zacks Rank 1. In the last 60 days, two earnings estimates moved north, while none moved south for the current year. The Zacks Consensus Estimate for earnings soared 30.8% in the same period. The company's expected earnings growth rate for the current year is 70% compared with the Retail - Restaurants industry's estimated rally of 13.9%.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss . This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit http://www.zacks.com/performance  for information about the performance numbers displayed in this press release.


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CVS Health Corporation (CVS): Free Stock Analysis Report

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Restoration Hardware Holdings Inc. (RH): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Investing , Economy
Referenced Symbols: GRPN , CVS , DRI , TAST , RH



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