Demand for leisure and recreation activities are on the rise with people increasingly looking to beat the blues of daily life by chilling out at their favorite hangouts, going on holidays and breaks, and enjoying the summer. Also, an increase in the amount of disposable income has made it easier for them to indulge in activities, which they would have otherwise put on hold in a difficult economic scenario.
Leisure companies are engaged in providing and managing gaming, lodging, marinas, sports facilities and teams, travel and tourism, movie theaters, entertainment as well as cruises.
There are a number of factors driving consumer demand for leisure services. These include the evolution of a global marketplace, rising customer confidence, significant improvement in technology, expanded use of social media and mobile, and extensive retail development. The leisure industry has performed well so far in 2015 on the back of improved discretionary spending driven by improved job prospects, rising wages, lower and now stabilizing gasoline prices and renewed optimism as a result of the housing recovery.
The industry is largely driven by consumer sentiment. After improving in May, consumer confidence improved further in June on strong job gains. The latest gain reflects the fact that consumers have become confident given the current state of business and employment conditions. This translated into increased leisure activity for Americans, and therefore greater use of leisure items. The positive sentiment pushed many investors to include leisure stocks in their basket.
Market analysts predict that renewed optimism could lead to greater spending by consumers going forward. Given the widespread optimism, it might be a good idea to bet on a handful of leisure services stocks that are poised to beat earnings estimates this quarter.
How to Pick?
Given the large number of industry participants, pinpointing stocks that have the potential to beat estimates could appear to be a tough task. But our proprietary methodology makes it fairly simple. One way to shortlist our choices this earnings season is by looking at stocks that have the combination of a favorable Zacks Rank - Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) - and a positive Zacks Earnings ESP .
Earnings ESP is our proprietary methodology for identifying stocks that have high chances of surprising in their next earnings announcement. It shows the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate.
Our research shows that for stocks with this combination, the chance of a positive earnings surprise is as high as 70%.
4 Leisure Picks
Norwegian Cruise Line Holdings Ltd. ( NCLH ) provides cruise experiences for travelers with various itineraries. The company presently sports a Zacks Rank #1 and an earnings ESP of +1.35%. The company is expected to report its second quarter results by the end of this month. The company is likely to benefit from the acquisition of Prestige Cruises International, Inc. - the market leader in the upscale cruise segment and the parent company of Oceania Cruises and Regent Seven Seas Cruises - completed in Nov 2014.
Based in New York, The Madison Square Garden Company ( MSG ) is engaged in sports, entertainment, and media businesses. This Zacks Rank #2 company's earnings have beaten the Zacks Consensus Estimate in the past two quarters on strong demand from its customers and partners for its media, sports and entertainment assets and brands. The company has an Earnings ESP of +5.13% and is set to report its fiscal fourth quarter and 2015 results next month.
Based in New York, SeaWorld Entertainment, Inc. ( SEAS ) operates as a theme park and entertainment company. This Zacks Rank #2 company has an Earnings ESP of +10.00%. The company that is expected to release its second quarter results on Aug 6, 2015 posted a positive earnings surprise of 10% last quarter. The company is trying hard to pull crowds with its consumer event programs and promotional offerings.
Based in Georgia, Carmike Cinemas Inc. ( CKEC ) operates as a motion picture exhibitor in the United States. The company presently has a Zacks Rank #2 and an Earnings ESP of +6.52%. The company is expected to report its second quarter results on Jul 27, 2015.
To Sum Up
Going forward, we expect the outlook for this industry to get better driven by an improving economic backdrop and strong industry fundamentals. Given the bright prospects, the industry now offers solid investment opportunities. We would like investors to watch out for leisure stocks with rising estimates and high growth projections. We believe investing in these companies, which have earnings beat potential on strong fundamentals, would yield strong returns for your portfolio in the short term.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
NORWEGIAN CRUIS (NCLH): Free Stock Analysis Report
MADISON SQUARE (MSG): Free Stock Analysis Report
SEAWORLD ENTERT (SEAS): Free Stock Analysis Report
CARMIKE CINEMA (CKEC): Free Stock Analysis Report
To read this article on Zacks.com click here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
