5 Top Stocks to Gain on Signs of Household Spending Resilience

Decreasing pandemic savings, coupled with sticky inflation, should have impacted American shoppers' desire to open up their wallets. However, consumers remained resilient and went on a shopping spree at retail outlets in February. Strength in the labor market and the Federal Reserve’s dovish stance led to retail spending last month.

This calls for keeping a tab on retailers such as Brinker International EAT, Fortune Brands Innovations, Inc. FBIN, CAVA Group, Inc. CAVA, Carrols Restaurant Group TAST and Texas Roadhouse TXRH, which are poised to gain even more.

Retail Sales Bounce Back in February

Per the Commerce Department, sales at retail outlets in the United States increased 0.6% in February from January’s revised decline of 1.1%. Spending at U.S. retailers took a beating in January due to the severe winter weather that kept American shoppers confined at home. However, outlays at retail stores rose in seven of the past 10-month period through February.

U.S. retail sales were broad-based in February, with sales at gas stations increasing 0.9% month over month. Sales also rose a solid 2.2% at home improvement stores, while car sales jumped 1.8%. American shoppers purchased electronics and appliances with its sales increasing 1.5%. At the same time, sales at bars, restaurants and various eatery outlets increased by 0.4%.

So, what drove retail sales upward? Spending at retail outlets increased primarily because of the strength in the labor market. Employers added 275,000 jobs in February, beating expectations of an increase in nonfarm jobs of 200,000, added the Bureau of Labor Statistics.

The unemployment rate, by the way, increased to 3.9% last month, but it's less than the long-term average of 5.7%, a tell-tale sign that jobs are added to the economy at a steady pace. Most importantly, wages improved, with the average hourly earnings increasing 4.3% year over year (read more: February Jobs Report Shows a Mid-Year Rate Cut: 5 Winners).

But it’s not just in February; sales at retail outlets are expected to improve throughout this year as well. This is because the Fed intends to trim interest rates during the latter part of the year, which will give consumers the wherewithal to spend more. Additionally, retailers have introduced enticing online and offline deals, which should lure consumers to spend on nonobligatory items.

5 Big Winners

It’s judicious for astute investors to keep an eye on retailers that directly profit from this promising economic backdrop and an improvement in retail sales.

We have, thus, selected five stocks that carry a Zacks Rank #2 (Buy), or #3 (Hold). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Brinker International owns, operates, develops and franchises various restaurants under Chili’s Grill & Bar. EAT currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has increased 3.4% over the past 60 days. The company’s expected earnings growth for the current year is 30.4%.

Fortune Brands Innovations is involved in the home products industry. FBIN currently has a Zacks Rank #3. The Zacks Consensus Estimate for its current-year earnings has increased 1.4% over the past 60 days. The company’s expected earnings growth for the current year is 9.7%.

CAVA Group is a category-defining Mediterranean fast-casual restaurant brand. CAVA currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has increased 64.3% over the past 60 days. The company’s expected earnings growth for the current year is 9.5%.

GameStop is the world's largest video game retailer. GME currently has a Zacks Rank #3. The Zacks Consensus Estimate for its current-year earnings has increased 5% over the past 90 days. The company’s expected earnings growth for the current year is 107.8%.

Texas Roadhouse is a full-service, casual dining restaurant chain. TXRH currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has increased 6.9% over the past 60 days. The company’s expected earnings growth for the current year is 25.8%.

Infrastructure Stock Boom to Sweep America

A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made.

The only question is “Will you get into the right stocks early when their growth potential is greatest?”

Zacks has released a Special Report to help you do just that, and today it’s free. Discover 5 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale.

Download FREE: How To Profit From Trillions On Spending For Infrastructure >>

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

Brinker International, Inc. (EAT) : Free Stock Analysis Report

Texas Roadhouse, Inc. (TXRH) : Free Stock Analysis Report

Carrols Restaurant Group, Inc. (TAST) : Free Stock Analysis Report

Fortune Brands Innovations, Inc. (FBIN) : Free Stock Analysis Report

CAVA Group, Inc. (CAVA) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

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

More Related Articles

Info icon

This data feed is not available at this time.

Sign up for the TradeTalks newsletter to receive your weekly dose of trading news, trends and education. Delivered Wednesdays.