For Immediate Release
Chicago, IL – November 17, 2022 – 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: BJ’s Wholesale Club Holdings Inc. BJ, H&R Block Inc. HRB, Wyndham Hotels & Resorts Inc. WH, Live Nation Entertainment Inc. LYV and Hyatt Hotels Corp. H.
Here are highlights from Wednesday’s Analyst Blog:
Peak Inflation Behind Us? 5 Consumer Discretionary Picks
U.S. stock markets have been witnessing an impressive rally since the beginning of October. We are not out of the woods as inflation remains elevated. However, recently released several data have clearly shown that inflation is dwindling albeit at a slow pace. A gradual decline in the inflation rate is likely to strengthen the U.S stock markets ongoing rally.
In order to combat a record-high inflation, the Fed adopted an ultra-hawkish monetary policy. The benchmark lending rate has been raised by 3.75% so far in 2022 and the central bank’s liquidity-squeezing strategy has skyrocketed the risk-free market return. The major sufferers of the Fed’s hawkish strategy were growth sectors such as consumer discretionary and technology.
As peak inflation seems behind us, the Fed is likely to relax its tighter monetary control. This will help the consumer discretionary sector, which has declined more than 30% year to date. We have selected five consumer discretionary stocks with a favorable Zacks Rank for investment. These are – BJ’s Wholesale Club Holdings Inc., H&R Block Inc., Wyndham Hotels & Resorts Inc., Live Nation Entertainment Inc. and Hyatt Hotels Corp.
Peak Inflation Seems to be Dwindling
On Nov 10, the Department of Labor reported that the consumer price index (CPI) in October rose 0.4% month over month and 7.7% year over year. The consensus estimate was for a month-over-month rise of 0.5% and a year-over-year gain of 7.9%
Core CPI (excluding volatile food and energy items) increased 0.3% month over month and 6.3% year over year. The consensus estimate was of a rise of 0.5% month over month and 6.5% year over year.
On Nov 15, the Department of Labor reported that the producer price index (PPI) increased 0.2% in October compared with the consensus estimate of a 0.5% rise. September’s data was revised downward from 0.4% to 0.2%.
Year over year, PPI rose 8% dropping from 8.4% in September. Core PPI increased 0.2% in October compared with the consensus estimate of 0.4%. Year over year, core PPI rose 5.4% in October.
In third-quarter 2022, the chain-weighted price index — a cost-of-living index adjusted for consumer behavior — rose 4.1%, well below the consensus estimate of a 5.3% gain. The personal consumption expenditure (PCE) price index increased 4.2%, exhibiting a sharp fall from 7.3% in the second quarter. The core PCE price index — Fed’s favorite inflation gauge — rose 4.5% in the third quarter, in line with market’s expectation.
Our Top Picks
We have narrowed our search to five consumer discretionary stocks that have strong potential for the rest of 2022. These stocks have seen positive earnings estimate revisions in the last 30 days. Each of our picks carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
BJ’s Wholesale Club’s ability to steer through the tough retail environment validates its strong customer value proposition and business model. BJ’s relentless efforts to boost its membership base, simplify assortments, enhance digital capabilities and accelerate club openings should support sales. We foresee sustained improvement in membership fee income as new club openings ramp up.
Markedly, BJ’s Wholesale Club’s acquisition of the perishable supply-chain from Burris Logistics puts it in an advantageous position to scale up supply chain capabilities and expand its fresh food offerings. A jump of 6% in member count in the second quarter speaks of BJ’s ability to drive traffic. We estimate a 14.3% and 7.1% increase in total revenues in fiscal 2022 and 2023, respectively.
BJ’s Wholesale Club has an expected earnings growth rate of 12% for the current year (ending January 2023). The Zacks Consensus Estimate for current-year earnings has improved 11.1% over the last seven days.
H&R Block is well poised to gain from its five-year strategy known as Block Horizons. HRB is expected to deliver sustainable revenues, operating profit growth and healthy returns on investments, while maintaining a strong balance sheet and liquidity position in the foreseeable future.
The main drivers of H&R Block’s performance post-pandemic will be the digital enablement of business, client addition and retention in both Assisted and DIY, greater usage of AI, along with machine learning for product improvement and expansion in small businesses.
H&R Block has an expected earnings growth rate of 9.4% for the current fiscal year (ending June 2023). The Zacks Consensus Estimate for the current fiscal year has improved 10.5% over the last 30 days.
Live Nation Entertainment has been benefiting from pent-up demand for live events and robust ticket sales. These, along with increased demand for digital ticketing and contactless transactions, are likely to have contributed to the upside.
LYV remains optimistic about its growth prospects in 2022 and 2023. Emphasis on cost-saving efforts bodes well. For concerts, Live Nation Entertainment said that it has already sold more than 100 million tickets for shows in the second half of 2022 and 2023. LYV is likely to benefit from the OCESA buyout.
Live Nation Entertainment has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 24.5% over the last 30 days.
Hyatt Hotels has benefitted from solid leisure transient demand, easing travel restrictions and ramped-up airline capacity. Also, focus on new hotel openings and acquisition initiatives bode well.
As people return to the office and further cross-border travel resumes, H remains optimistic about the recovery of business transient and its continued momentum over the back half of the year.
Hyatt Hotels has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for the current year has improved 70.1% over the last 30 days.
Wyndham operates as a hotel franchisor primarily in Canada, Mexico, Colombia, Ecuador, Turkey, Germany, the UK, the Caribbean and Margarita Island in Venezuela. WH operates through the Hotel Franchising and Hotel Management segments.
The Hotel Franchising segment licenses its lodging brands and provides related services to third-party hotel owners and others. The Hotel Management segment provides hotel management services for full-service and limited-service hotels.
Wyndham has an expected earnings growth rate of 21.5% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 5.8% over the last 7 days.
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Hyatt Hotels Corporation (H): Free Stock Analysis Report
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