Last week was disappointing for Wall Street as all the three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — fell 0.6%, 1% and 0.7%, respectively. The massive spike in new COVID-19 cases in several states of the United States and lingering concerns about the approval of the second coronavirus-aid package were predominantly responsible for the stock market weakness.
However, market participants rejoiced on Friday evening after the FDA gave emergency authorization to the first coronavirus vaccine developed by Pfizer Inc. (PFE) and BioNTech SE (BNTX). Although nationwide vaccination will take some time, the approval of a vaccine will be a game-changer for 2021.
Importance of Coronavirus Vaccine Approval
The FDA authorization of a COVID-19 vaccine this year means that the economy will reopen and gradually operate at the pre-pandemic level. The news will have a strong impact on the stock market.
Since the lockdowns imposed in March, the U.S. economy is operating at a significant sub-optimal level. Consequently, the cyclical or reopening stocks will get a big push from market participants aside from the growth-oriented technology and communications stocks.
Moreover, strong pent-up demand is likely to drive the U.S. economy in 2021. Personal savings rate is high in 2020 due to concerns over coronavirus-led economic uncertainties.
Consumers were restrained or restricted by the government to spend on those items that were closed during lockdowns. Reopening of the economy with the easing of the pandemic will significantly boost personal spending, the largest component of the U.S. GDP.
Importance of Consumer Discretionary Sector
The consumer discretionary sector comprises businesses that sell goods and services, which are considered non-essential by consumers. These are the products that consumers can avoid without any major consequences to their well-being.
In fact, these goods are desirable only if the available income of an individual is sufficient to purchase them. This is in sharp contrast to consumer staples products that are absolutely necessary.
Notably, the U.S. economy was performing well buoyed by strong consumer spending before the outbreak of coronavirus. The consumer discretionary sector is likely to be a major gainer in stock markets as the U.S. economy will gradually return to the pre-pandemic level as more parts of it reopen.
Our Top Picks
We have narrowed down our search to seven consumer discretionary stocks that have strong growth potential for 2021 and have witnessed solid earnings estimation revisions within the last 60 days. Each of our picks sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performance of our seven picks year to date.
Crocs Inc. CROX designs, develops, manufactures, markets and distributes casual lifestyle footwear and accessories for men, women and children worldwide. It offers various footwear products, including clogs, sandals, flips and slides, shoes, and boots under the Crocs brand name. The company has an expected earnings growth rate of 11.7% for next year. The Zacks Consensus Estimate for next-year earnings has improved 1.7% over the last 7 days.
Whirlpool Corp. WHR manufactures and markets home appliances and related products. It operates through four segments: North America; Europe, Middle East and Africa; Latin America; and Asia. The company has an expected earnings growth rate of 8.4% for next year. The Zacks Consensus Estimate for next-year earnings has improved 21.6% over the last 60 days.
Sleep Number Corp. SNBR provides sleep solutions and services in the United States. It designs, manufactures, markets, retails and services beds, pillows, sheets, and other bedding products under the Sleep Number name. The company has an expected earnings growth rate of 6.4% for next year. The Zacks Consensus Estimate for next-year earnings has improved 3.6% over the last 30 days.
Vista Outdoor Inc. VSTO designs, manufactures and markets consumer products for outdoor sports and recreation markets in the United States and internationally. It operates in two segments: Shooting Sports and Outdoor Products. The company has an expected earnings growth rate of more than 100% for the current year (ending March 2021). The Zacks Consensus Estimate for the current year has increased 37.1% over the last 60 days.
YETI Holdings Inc. YETI designs, markets, retails and distributes products for the outdoor and recreation market under the YETI brand in the United States, Canada, Australia and Japan. The company has an expected earnings growth rate of 17.8% for next year. The Zacks Consensus Estimate for next-year earnings has increased 19.2% over the last 60 days.
Acushnet Holdings Corp. GOLF designs, develops, manufactures and distributes golf products in the United States, Europe, the Middle East, Africa, Japan, Korea, and worldwide. It operates through four segments: Titleist Golf Balls, Titleist Golf Clubs, Titleist Golf Gear and FootJoy Golf Wear. The company has an expected earnings growth rate of 46.8% for next year. The Zacks Consensus Estimate for next-year earnings has increased 0.6% over the last 30 days.
Kontoor Brands Inc. KTB is a lifestyle apparel company that designs, manufactures, sources, markets, and distributes apparel under the Wrangler and Lee brands in the United States and internationally. The company has an expected earnings growth rate of 42.6% for next year. The Zacks Consensus Estimate for next-year earnings has increased 24.4% over the last 60 days.
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Whirlpool Corporation (WHR) : Free Stock Analysis Report
Crocs, Inc. (CROX) : Free Stock Analysis Report
Acushnet Holdings Corp. (GOLF) : Free Stock Analysis Report
Vista Outdoor Inc. (VSTO) : Free Stock Analysis Report
Sleep Number Corporation (SNBR) : Free Stock Analysis Report
YETI Holdings, Inc. (YETI) : Free Stock Analysis Report
Kontoor Brands, Inc. (KTB) : Free Stock Analysis Report
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