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For Immediate Release
Chicago, IL – September 17, 2024 – Stocks in this week’s article are TransMedics Group TMDX, Iamgold IAG, Graham GHM and GIII Apparel Group GIII.
4 Stocks Backed by High Efficiency for Solid Gains Amid Volatility
Efficiency level measures a company’s capability to transform available input into output and is often considered an important parameter for gauging its potential to make profits. A company with a high efficiency level is expected to provide stellar returns as it is believed to be positively correlated with price performance.
However, at times, it becomes difficult to measure the efficiency level of a company. This is why one must consider the popular efficiency ratios listed below while selecting stocks.
To that end, TransMedics Group, Iamgold, Graham and GIII Apparel Group made it through the screening process:
These efficiency ratios are:
Receivables Turnover: This is the ratio of 12-month sales to four-quarter average receivables. It shows a company’s potential to extend its credit and collect debt in terms of that credit. A high receivables turnover ratio or the “accounts receivable turnover ratio” or “debtor’s turnover ratio” is desirable as it shows that the company is capable of collecting its accounts receivables or that it has quality customers.
Asset Utilization: This ratio indicates a company’s capability to convert assets into output and is thus a widely known measure of efficiency level. It is calculated by dividing total sales over the past 12 months by the last four-quarter average of total assets. Like the above ratios, high asset utilization may indicate that a company is efficient.
Inventory Turnover: The ratio of the 12-month cost of goods sold (COGS) to a four-quarter average inventory is considered one of the most popular efficiency ratios. It indicates a company’s ability to maintain a suitable inventory position. While a high value indicates that the company has a relatively low level of inventory compared to COGS, a low value indicates that the company is facing declining sales, which has resulted in excess inventory.
Operating Margin: This efficiency measure is the ratio of operating income over the past 12 months to sales over the same period. It measures a company’s ability to control operating expenses. Hence, a high value of the ratio may indicate that the company manages its operating expenses more efficiently than its peers.
The use of these few criteria narrowed down the universe of over 7,906 stocks to 13.
Here are the top four stocks that made it through the screen:
TransMedics Group
TransMedics Group is a commercial-stage medical technology company. TMDX has an average four-quarter earnings surprise of 287.5%.
Iamgold
Iamgold is an international gold exploration and mining company based in Canada. IAG has an average four-quarter earnings surprise of 200%.
Graham
Graham designs and builds vacuum and heat transfer equipment for process industries and energy markets worldwide. GHM has an average four-quarter earnings surprise of nearly 133.3%.
GIII Apparel Group
GIII Apparel Group is a manufacturer, designer and distributor of apparel and accessories under licensed brands, owned brands and private label brands. GIII has an average four-quarter earnings surprise of 118.2%.
You can get the rest of the stocks on this list by signing up now for your 2-week free trial to the Research Wizard and start using this screen in your own trading. Further, you can also create your own strategies and test them first before taking the investment plunge.
The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.
Click here to sign up for a free trial to the Research Wizard today.
For the rest of this Screen of the Week article please visit Zacks.com at: https://www.zacks.com/stock/news/2336294/4-stocks-backed-by-high-efficiency-for-solid-gains-amid-volatility
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Contact: Jim Giaquinto
Company: Zacks.com
Phone: 312-265-9268
Email: pr@zacks.com
Visit: https://www.zacks.com/
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
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 https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
Zacks Investment Research
Shares of Iamgold (IAG) have been strong performers lately, with the stock up 6.7% over the past month. The stock hit a new 52-week high of $5.49 in the previous session. Iamgold has gained 114.2% since the start of the year compared to the -4.2% move for the Zacks Basic Materials sector and the 28.6% return for the Zacks Mining - Gold industry.
What's Driving the Outperformance?
The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on August 8, 2024, Iamgold reported EPS of $0.16 versus consensus estimate of $0.08.
For the current fiscal year, Iamgold is expected to post earnings of $0.41 per share on $1.55 billion in revenues. This represents a 355.56% change in EPS on a 56.67% change in revenues. For the next fiscal year, the company is expected to earn $0.58 per share on $1.86 billion in revenues. This represents a year-over-year change of 41.87% and 20.53%, respectively.
Valuation Metrics
Iamgold may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.
On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.
Iamgold has a Value Score of B. The stock's Growth and Momentum Scores are C and C, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 13.2X current fiscal year EPS estimates, which is not in-line with the peer industry average of 17X. On a trailing cash flow basis, the stock currently trades at 9.8X versus its peer group's average of 10.4X. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
Zacks Rank
We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Iamgold currently has a Zacks Rank of #1 (Strong Buy) thanks to rising earnings estimates.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Iamgold meets the list of requirements. Thus, it seems as though Iamgold shares could still be poised for more gains ahead.
How Does IAG Stack Up to the Competition?
Shares of IAG have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is Idaho Strategic Resources, Inc. (IDR). IDR has a Zacks Rank of # 2 (Buy) and a Value Score of D, a Growth Score of A, and a Momentum Score of A.
Earnings were strong last quarter. Idaho Strategic Resources, Inc. beat our consensus estimate by 142.86%, and for the current fiscal year, IDR is expected to post earnings of $0.72 per share on revenue of $25.7 million.
Shares of Idaho Strategic Resources, Inc. have gained 40.1% over the past month, and currently trade at a forward P/E of 19.61X and a P/CF of 65.53X.
The Mining - Gold industry may rank in the bottom 52% of all the industries we have in our universe, but there still looks like there are some nice tailwinds for IAG and IDR, even beyond their own solid fundamental situation.
Zacks Investment Research
Last Friday, all of the three most widely followed indexes closed out a winning week. The tech-focused Nasdaq Composite, the S&P 500 and the Dow Jones Industrial Average advanced 6%, 4% and 2.6%, respectively. These are approximately two-week highs for all three benchmark indexes.
With both consumer and producer-side inflation coming in line with expectations, investor mood was upbeat about the Fed bringing down rates more than expected earlier. The labor market was modestly up. Backed up by a positive consumer sentiment report released late in the week, currently there is a raging debate on the extent of the rate cut that would be announced by the Fed.
Per CME’s FedWatch tool, while a 25 bps rate cut still edges ahead with a 51% probability, a 50 bps cut has soared to 49%. Trade throughout the week will be dominated by the Fed’s signals and how the market interprets them.
Regardless of market conditions, we, here at Zacks, provide investors with unbiased guidance on how to beat the market.
As usual, Zacks Research guided investors over the past three months with its time-tested methodologies. Given the prevailing market uncertainty, you may want to look at our feats to prepare better for your next action.
Here are some of our key achievements:
IAMGOLD and Sierra Surge Following Zacks Rank Upgrade
Shares of IAMGOLD Corporation IAG have surged 31.2% (versus the S&P 500’s 0.9% increase) since it was upgraded to a Zacks Rank #1 (Strong Buy) on July 18.
Another stock, Sierra Bancorp BSRR, was also upgraded to a Zacks Rank #1 on July 18 and has returned 7.9% since then.
Zacks Rank, our short-term rating system, has earnings estimate revisions at its core. Empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements.
A hypothetical portfolio of Zacks Rank #1 (Strong Buy) stocks returned +20.63% in the year-to-date period through April 1st, 2024, vs. +11.3% for the S&P 500 index and +7.7% for the equal-weight S&P 500 index. This hypothetical portfolio returned +20.63% in 2023 vs. +24.83% for the S&P 500 index and +15% for the equal-weight S&P 500 index. The portfolio of Zacks Rank #1 stocks is an equal-weight portfolio, while the S&P 500 index is a market-cap-weighted index that has been notably distorted by the concentrated performance of mega-cap stocks since October 2022.
The Zacks Model Portfolio - consisting of Zacks Rank #1 stocks – has outperformed the S&P index by more than 16 percentage points since 1988 (Through April 1st, 2024, the Zacks # 1 Rank stocks generated an annualized return of +27.6% since 1988 vs. +11.1% for the S&P 500 index).You can see the complete list of today’s Zacks Rank #1 stocks here >>>
Check IAMGOLD’ historical EPS and Sales here>>>
Check Sierra’s historical EPS and Sales here>>>
Zacks Recommendation Upgrades Financial Institutions and First United Higher
Shares of Financial Institutions, Inc. FISI and First United Corporation FUNC have advanced 8.9% (versus the S&P 500’s 3.8% rise) and 4.7% (versus the S&P 500’s 4.4% rise), since their Zacks Recommendation was upgraded to Outperform on July 25 and July 26, respectively.
While the Zacks Rank is our short-term rating system that is most effective over the one- to three-month holding horizon, the Zacks Recommendation aims to predict performance over the next 6 to 12 months. However, just like the Zacks Rank, the foundation for the Zacks Recommendation is trends in earnings estimate revisions.
The Zacks Recommendation classifies stocks into three groups — Outperform, Neutral and Underperform. While these recommendations are determined quantitatively, our analysts have the flexibility to override them for the 1100+ stocks they closely follow based on their better judgment of factors such as valuation, industry conditions and management effectiveness than the quantitative model.
To access our research reports with Zacks Recommendations for the 1100+ stocks we cover, click here>>>
Zacks Focus List Stocks Palantir, Virtu Shoot Up
Shares of Palantir Technologies Inc. PLTR, which belongs to the Zacks Focus List, have gained 49.3% over the past 12 weeks. The stock was added to the Focus List on March 26, 2024. Another Focus-List holding, Virtu Financial, Inc. VIRT, which was added to the portfolio on July 31, 2023, has returned 39.2% over the past 12 weeks. The S&P 500 has advanced 3.1% over this period.
The Focus List portfolio returned +10.23% in 2024 Q1 vs. +10.56% for the S&P 500 index and +7.9% for the equal-weight S&P 500 index.
The 50-stock Zacks Focus List model portfolio returned +31.44% in 2023 vs. +26.28% for the S&P 500 index and +13.61% for the equal-weight S&P 500 index. In 2022, the portfolio produced -15.2% vs. the S&P 500 index’s -17.96%.
Since 2004, the Focus List portfolio has produced an annualized return of +11.91% (through March 31st, 2024). This compares to a +10.25% annualized return for the S&P 500 index in the same time period.
Unlock all of our powerful research, tools and analysis, including the Focus List, Zacks #1 Rank List, Equity Research Reports, Zacks Earnings ESP Filter, Premium Screener and more, as part of Zacks Premium. Gain full access now >>
Zacks ECAP Stocks Fair Isaac and UnitedHealth Make Significant Gains
Fair Isaac Corporation FICO, a component of our Earnings Certain Admiral Portfolio (ECAP), has jumped 30.1% over the past 12 weeks. UnitedHealth Group Incorporated UNH has followed Fair Isaac with 23.2% returns.
The Zacks Earnings Certain Admiral Portfolio (ECAP), which consists of 30 concentrated, ultra-defensive, long-term Buy-and-Hold stocks, returned +9.08% in the year-to-date period (through March 31st, 2024) vs. +10.42%. In 2023, the portfolio returned +12.17% vs. +26.28% for the S&P 500 index. The portfolio returned -4.7% in 2022 vs. the S&P 500 index’s -17.96%.
With little to no turnover and annual rebalance periodicity, the ECAP seeks to minimize capital loss by holding shares of companies whose earnings streams exhibit a proven 20+ year track record of surviving recessionary periods with minimal impact on aggregate earnings growth relative to the overall S&P 500.
The ECAP and many other model portfolios are available as part of Zacks Advisor Tools, a cloud-based solution to access Zacks award-winning stock, mutual fund and ETF research. Click here to schedule a demo.
Zacks ECDP Stocks 3M and Starbucks Outshine Peers
3M Company MMM, which is part of our Earnings Certain Dividend Portfolio (ECDP), has returned 30.1% over the past 12 weeks. Another ECDP stock, Starbucks Corporation SBUX, has climbed 23.4% over the same time frame. Of course, the inclination of investors toward quality dividend stocks to secure an income stream amid heightened market volatility contributed to this performance.
Check 3M’s dividend history here>>>
Check Starbucks’ dividend history here>>>
With an extremely low Beta and a history of minimum earnings variability over the last 20+ years, this 25-stock portfolio helps significantly mitigate risk.
The Zacks Earnings Certain Dividend Portfolio (ECDP) returned +4.47% in the year-to-date period (through March 31st, 2024) vs. +10.42% for the S&P 500 index (IVV) and +6.9% for the Dividend Aristocrats ETF (NOBL).
The portfolio returned -0.9% in 2023 vs. +26.28% for the S&P 500 index and +8.11% for NOBL. The portfolio returned -2.3% in 2022 vs. -17.96% for the S&P 500 index and -8.34% for NOBL.
Click here to access this portfolio on Zacks Advisor Tools.
Zacks Top 10 Stocks — Badger Meter Delivers Solid Returns
Badger Meter, Inc. BMI, from the Zacks Top 10 Stocks for 2024, has jumped 35.4% year to date compared with an 18.3% increase for the S&P 500 Index.
The Top 10 portfolio returned +19.56% in 2024 Q1 vs. +10.56% for the S&P 500 index and +7.9% for the equal-weight version of the index.
The Top 10 portfolio returned +25.15% in 2023 vs. +26.28% for the S&P 500 index. Since 2012, the Top 10 portfolio has produced a cumulative return of +1,060.9% through the end of 2023 vs. +360.1% for the S&P 500 index.
Since 2012, the Zacks Top 10 portfolio has produced an annualized return of +25.02% through the end of 2024 Q1 vs. +14.1% for the S&P 500 index and +12.7% for the equal-weight version of the index. The portfolio has produced a cumulative return of +1,442.3% vs. +403.03% for the S&P 500 index and +331.29% for the equal-weight index.
Zacks Investment Research
OrthoPediatrics Corp. KIDS recently launched its Enabling Technologies division, which will leverage the company's core mission of addressing unmet pediatric needs in orthopedics.
The advancement with the latest launch positions OrthoPediatrics at the forefront of the pediatric digital health and enabling technologies sectors.
Following the announcement, shares of OrthoPediatrics rose 2.15% to $32.38 on Friday. The company continues to gain a high level of synergies from its various latest developments within the pediatric digital health space. Accordingly, we expect market sentiment to continue to remain positive around this announcement.
More on OrthoPediatrics’ Enabling Technologies Division
Led by industry veteran Kevin Unger, this new division is set to differentiate OrthoPediatrics' core business, generate sustainable revenue growth, and gain access to new markets and specialties beyond orthopedics.
The company has made significant strides in the field through its distribution of the 7D Flash Navigation System. Additionally, it collaborated with 3D Side, S.A. for patient-specific cutting guides. These innovations have laid a strong foundation for the Enabling Technologies division.
OrthoPediatrics’ Business Advancements
Given the success of the above-mentioned developments, KIDS is all set to launch its two groundbreaking technology platforms. First, Playbook is a cutting-edge surgical workflow and outcome optimization platform. It is designed to enhance surgical planning, collaboration and intraoperative workflow. Playbook is aimed at revolutionizing how surgeries are planned and executed, potentially resulting in improved outcomes and more efficient processes.
Second, Robotic-Assistance is for Cochlear Implant Technology.OrthoPediatrics partnered with iotaMotion, Inc. to bring a robotic-assisted insertion system to enhance cochlear implant surgery. This technology offers a slow electrode array insertion that is agnostic to cochlear implant manufacturers, providing greater control and precision for pediatric patients.
Other Recent Developments by OrthoPediatrics
In May, the company received the “Breakthrough Device” designation from the Food and Drug Administration for its new eLLi surgical device. eLLi is an implant designed to address severe pathology associated with early onset scoliosis (EOS), which can be associated with thoracic insufficiency, a potentially life-threatening condition. This innovative product should be a great addition to the suite of products for pediatric patients with scoliosis.
Earlier this year, OrthoPediatrics launched a new RESPONSE Rib and Pelvic Fixation system to treat children with EOS. The system represents OrthoPediatrics' first solution to treat patients at risk of thoracic insufficiency syndrome. The new addition to the RESPONSE portfolio includes implants and instruments for rib and pelvic fixation, and associated devices to connect the fixation points.
Industry Prospects Favor OrthoPediatrics
Per a Grand View Research report, the global pediatric orthopedic devices market was valued at $3.83 billion in 2023 and is projected to witness a CAGR of 11.0% from 2024 to 2030.
Primary factors behind the projected market surge include growing awareness of orthopedic conditions in children and the rise in congenital & developmental disorders. Furthermore, innovations such as adjustable & customizable devices and improved materials for better functionality & safety are fueling market growth.
Henceforth, OrthoPediatrics' latest announcement is well-timed.
KIDS’ Price Performance
Year to date, shares of KIDS have risen 0.7% compared with the industry’s 9.3% growth.
KIDS’ Zacks Rank and Other Key Picks
KIDS currently carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks in the broader medical space are Intuitive Surgical ISRG, TransMedics Group TMDX and Boston Scientific BSX. While Intuitive Surgical and TransMedics currently sport a Zacks Rank #1 (Strong Buy) each, Boston Scientificcarries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Intuitive Surgical’s shares have surged 64.3% in the past year. Estimates for the company’s earnings have moved north 5.1% to $1.65 per share for 2024 in the past 30 days.
ISRG’s earnings beat estimates in each of the trailing four quarters, delivering an average surprise of 8.97%. In the last reported quarter, it posted an earnings surprise of 16.34%.
Estimates for TransMedics’ 2024 EPS have moved up 125% to 27 cents in the past 30 days. Shares of the company have soared 156.9% in the past year compared with the industry’s 17.5% growth.
TMDX’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 287.50%. In the last reported quarter, it delivered an earnings surprise of 66.67%.
Estimates for Boston Scientific’s 2024 EPS have increased 1.7% to $2.40 in the past 30 days. In the past year, shares of BSX have risen 57.2% compared with the industry’s 19.5% growth.
In the last reported quarter, BSX delivered an earnings surprise of 6.90%. Its earnings surpassed estimates in each of the trailing four quarters, the average surprise being 7.18%.
Zacks Investment Research
Efficiency level measures a company’s capability to transform available input into output and is often considered an important parameter for gauging its potential to make profits. A company with a high efficiency level is expected to provide stellar returns as it is believed to be positively correlated with price performance.
However, at times, it becomes difficult to measure the efficiency level of a company. This is why one must consider the popular efficiency ratios listed below while selecting stocks.
To that end, TransMedics Group TMDX, Iamgold IAG, Graham GHM and GIII Apparel Group GIII made it through the screening process:
These efficiency ratios are:
Receivables Turnover: This is the ratio of 12-month sales to four-quarter average receivables. It shows a company’s potential to extend its credit and collect debt in terms of that credit. A high receivables turnover ratio or the “accounts receivable turnover ratio” or “debtor’s turnover ratio” is desirable as it shows that the company is capable of collecting its accounts receivables or that it has quality customers.
Asset Utilization: This ratio indicates a company’s capability to convert assets into output and is thus a widely known measure of efficiency level. It is calculated by dividing total sales over the past 12 months by the last four-quarter average of total assets. Like the above ratios, high asset utilization may indicate that a company is efficient.
Inventory Turnover: The ratio of the 12-month cost of goods sold (COGS) to a four-quarter average inventory is considered one of the most popular efficiency ratios. It indicates a company’s ability to maintain a suitable inventory position. While a high value indicates that the company has a relatively low level of inventory compared to COGS, a low value indicates that the company is facing declining sales, which has resulted in excess inventory.
Operating Margin: This efficiency measure is the ratio of operating income over the past 12 months to sales over the same period. It measures a company’s ability to control operating expenses. Hence, a high value of the ratio may indicate that the company manages its operating expenses more efficiently than its peers.
Screening Criteria
In addition to the above-mentioned ratios, we have added a favorable Zacks Rank — Zacks Rank #1 (Strong Buy) — to the screen to make this strategy more profitable. You can see the complete list of today’s Zacks #1 Rank stocks here.
Inventory Turnover, Receivables Turnover, Asset Utilization, and Operating Margin greater than the industry average
(Values of these ratios higher than industry averages may indicate that the efficiency level of the company is higher than its peers.)
The use of these few criteria narrowed down the universe of over 7,906 stocks to 13.
Here are the top four stocks that made it through the screen:
TransMedics Group
TransMedics Group is a commercial-stage medical technology company. TMDX has an average four-quarter earnings surprise of 287.5%.
Iamgold
Iamgold is an international gold exploration and mining company based in Canada. IAG has an average four-quarter earnings surprise of 200%.
Graham
Graham designs and builds vacuum and heat transfer equipment for process industries and energy markets worldwide. GHM has an average four-quarter earnings surprise of nearly 133.3%.
GIII Apparel Group
GIII Apparel Group is a manufacturer, designer and distributor of apparel and accessories under licensed brands, owned brands and private label brands. GIII has an average four-quarter earnings surprise of 118.2%.
You can get the rest of the stocks on this list by signing up now for your 2-week free trial to the Research Wizard and start using this screen in your own trading. Further, you can also create your own strategies and test them first before taking the investment plunge.
The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.
Click here to sign up for a free trial to the Research Wizard today.
Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.
Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance
Zacks Investment Research
With inflation cooling to its lowest level in more than three years, the U.S. economy is signaling a shift toward stability. August saw inflation rise by just 2.5% year over year, down from 2.9% in July. This steady decline, coupled with the expectation of an interest rate cut from the Federal Reserve, is setting the stage for improved consumer confidence. For investors, this marks an opportune moment to consider sectors poised to benefit from these positive trends.
One of the beneficiaries of this cooling inflationary environment is the Consumer Discretionary sector. Whether it’s spending on apparel, electronics or home improvements, the demand for discretionary products typically rises when inflation is under control. These trends are paving the way for a rebound in consumer spending, creating favorable conditions for companies such as G-III Apparel Group, Ltd. GIII, Victoria's Secret & Co. VSCO, Wolverine World Wide, Inc. WWW and Crocs, Inc. CROX.
Reduced inflationary pressures lower the costs of raw materials and production for companies. This means that businesses can either pass on savings to customers through lower prices, stimulating demand, or improving their profit margins. The dual benefit of lower input costs and increased consumer spending could lead to stronger earnings growth in the coming quarters, making this a promising sector for investors.
Another factor supporting consumer discretionary stocks is the anticipated interest rate cut by the Federal Reserve in the upcoming meeting as inflation eases. Consumers may be more inclined to finance big-ticket purchases as borrowing costs decrease. At the same time, companies within this sector can benefit from lower borrowing costs for expansion, increasing their ability to invest in new products or markets.
Below, we have highlighted four companies in this sector that are well-positioned to capitalize on the combination of cooling inflation and a more accommodative monetary environment.
Past-Year Stock Price Performance for Our Picks
4 Strong Consumer Discretionary Stocks
G-III Apparel Capitalizes on Strategic Brand Expansions
G-III Apparel Group stands out as a strong investment prospect, driven by its strategic global expansion and brand portfolio enhancement. The company’s licensing agreements, such as the highly anticipated Converse apparel launch in Fall 2025, along with partnerships with leading brands like Halston, Nautica and Champion Outwear, are poised to unlock new revenue streams. G-III’s increased stake in All We Wear Group will boost its European presence, with expected sales growth exceeding $200 million in the next three to five years. The robust performance of its owned brands, Donna Karan, DKNY and Karl Lagerfeld, continues to drive market share gains, further solidifying the company’s promising outlook.
The Zacks Consensus Estimate for G-III Apparel’s current and next financial-year earnings per share has increased by 10.5% and 10.2% to $4.01 and $4.11, respectively, over the past seven days. This Zacks Rank #1 (Strong Buy) company has a trailing four-quarter earnings surprise of 118.2%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
Victoria’s Secret New Product Lines Popular With Buyers
Victoria’s Secret is a compelling investment opportunity, thanks to its focus on product innovation and strategic marketing. The launch of new collections, including the Dream bra and Featherweight Max sports bra, has resonated well with consumers, bolstering sales both online and in-store. The brand’s strong performance in international markets and increased digital market share support revenue expansion. Coupled with disciplined expense management and a robust loyalty program, Victoria’s Secret is well-positioned to capitalize on these trends.
The Zacks Consensus Estimate for Victoria’s Secret’s current and next financial-year earnings per share has risen by 14.5% and 13.2% to $1.98 and $2.14, respectively, over the past 30 days. This Zacks Rank #1 company has a trailing four-quarter earnings surprise of 2.9%, on average.
Wolverine’s Turnaround Plan Spurs Operational Gains
Investors can have confidence in Wolverine World Wide due to its successful execution of a strategic turnaround plan. This plan has not only stabilized the business but also enhanced operational efficiency. Key achievements include a reduction in inventory and debt, which has improved financial flexibility and investment capacity. The company’s introduction of new, trend-right products, such as those from Saucony, has resonated well with consumers. Wolverine’s efforts to enhance brand positioning, optimize distribution and invest in demand-creation initiatives have bolstered market traction.
The Zacks Consensus Estimate for Wolverine’s current and next financial-year earnings per share has increased by 3.7% and 0.8% to 85 cents and $1.28, respectively, over the past 60 days. This Zacks Rank #1 company has a trailing four-quarter earnings surprise of 7.5%, on average.
Crocs Has Record Q2 on Back of Global Expansion
Crocs presents a solid investment play, thanks to its strategic investments in brand awareness, product innovation and global market expansion. The company’s record-setting second quarter, driven by strong sales of popular items like the SpongeBob clog and the Salehe Juniper sneaker, highlights its successful product innovation. Coupled with impressive international market performance, particularly in China and Australia, and increasing demand for its signature Classic Clog and Jibbitz, Crocs is effectively capturing a larger share of the global market. Ongoing investments in marketing and digital channels bolster its ability to attract and retain customers.
The Zacks Consensus Estimate for Crocs’ current and next financial-year earnings per share has advanced by 1.2% and 1.5% to $12.85 and $13.99, respectively, over the past 60 days. This Zacks Rank #1 company has a trailing four-quarter earnings surprise of 14.9%, on average.
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