The U.S. economy is on solid ground as inflation, although above the Federal Reserve’s 2% target, has declined sharply. The Commerce Department, in its second and final estimate, said last week that U.S. gross domestic product (GDP) grew a solid 3.2% in the fourth quarter of 2023 driven by robust consumer spending.
Although growth in the fourth quarter was lower than the third quarter’s growth of 4.9%, the economy is still advancing at a rapid pace as price pressures continue to ease and raise hopes of a softer landing than expected earlier.
Moreover, GDP growth has now topped more than 2% for six consecutive quarters. Overall expansion in the nation’s gross domestic product was 2.3% in 2023, higher than the 1.9% recorded in the preceding year.
Inflation declined sharply from its peak of 9.1% in June 2022 to around 3.1% in January 2024, which eased price pressures, allowing consumers to spend more freely. Consumer spending, which accounts for 70% of the overall economic activity in the nation, advanced a solid 3% at an annualized pace in the fourth quarter.
Also, personal consumption expenditures (PCE), the Federal Reserve’s preferred gauge of inflation, eased substantially in the fourth quarter. The PCE index climbed just 1.8% in the final quarter of 2023. Core PCE, which excludes the volatile energy and food prices, rose 2.1% in the fourth quarter.
Price pressures are expected to ease further in the coming days. The Federal Reserve has also indicated multiple interest rate cuts in 2024, with the first expected in May or June. Markets are now pricing in a 55.4% chance that the Federal Reserve will go for the first 25-basis points rate cut in June, according to the CME FedWatch Tool.
Also, the International Monetary Fund projects the U.S. economy to grow at an annualized pace of 2.1% in 2024, a lot higher than its forecast for other major economies.
Our Choices
We have narrowed our search to five consumer discretionary stocks such as Wynn Resorts, Limited WYNN, Interface, Inc. TILE, Ralph Lauren Corporation RL, Royal Caribbean Cruises Ltd. RCL and Netflix, Inc NFLX, which have strong potential for 2024. These stocks have seen positive earnings estimate revisions in the last 60 days. Each of our picks carries a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Wynn Resorts, Limited together with its subsidiaries, is a leading developer, owner and operator of casino resorts. WYNN currently owns and operates casino hotel resort properties in Las Vegas and the Macau Special Administrative Region of the People’s Republic of China.
Wynn Resorts’expected earnings growth rate for the current year is 28.8%. The Zacks Consensus Estimate for current-year earnings has improved 15.3% over the past 60 days. WYNN currently has a Zacks Rank #2.
Interface, Inc. is the world’s largest manufacturer of modular carpets, which it markets under the Interface and FLOR brands. TILE is committed to the goal of sustainability and doing business in ways that minimize the impact on the environment while enhancing shareholder value.
Interface’sexpected earnings growth rate for the current year is 2%. The Zacks Consensus Estimate for current-year earnings has improved 32.5% over the past 60 days. TILE presently sports a Zacks Rank #1.
Ralph Lauren Corporation is a major designer, marketer and distributor of premium lifestyle products in North America, Europe, Asia and internationally. RL offers products in the apparel, footwear, accessories, home furnishings, and other licensed product categories.
Ralph Lauren’s expected earnings growth rate for the current year is 22.7%. The Zacks Consensus Estimate for the current-year earnings has improved 8.5% over the past 60 days. RL currently sports a Zacks Rank #1.
Royal Caribbean Cruises Ltd. owns and operates three global brands, Royal Caribbean International, Celebrity Cruises and Azamara Club Cruises. Additionally, RCL has a 50% investment in a joint venture with TUI AG, which operates the brand TUI Cruises. Royal Caribbean Cruises’ brands primarily serve the contemporary, premium and deluxe segments of the cruise vacation industry, which also includes the budget and luxury segments.
Royal Caribbean Cruises’ expected earnings growth rate for the current year is 47.1%. The Zacks Consensus Estimate for current-year earnings has improved 9.5% over the past 60 days. RCL currently carries a Zacks Rank #2.
Netflix, Inc. is considered a pioneer in the streaming space. NFLX has been spending aggressively on building its portfolio of original shows. This is helping Netflix sustain its leading position despite the launch of new services like Disney+ and Apple TV+, as well as existing services like Amazon Prime Video.
Netflix’s expected earnings growth rate for the current year is 41.6%. The Zacks Consensus Estimate for the current-year earnings has improved 6.5% over the past 60 days. NFLX currently sports a Zacks Rank #1.
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Netflix, Inc. (NFLX) : Free Stock Analysis Report
Royal Caribbean Cruises Ltd. (RCL) : Free Stock Analysis Report
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Interface, Inc. (TILE) : Free Stock Analysis Report
