4 Solid Stocks to Buy on a Steady Rise in Consumer Spending

A steady rise in income has been a challenge for the Federal Reserve in controlling sky-high inflation. However, inflation is finally showing signs of cooling, while wages continue to be on the rise. A steadily rising personal income is also allowing consumers to spend more freely.

The Commerce Department said on Jun 28 that personal income increased 0.5% in May, following a 0.3% jump in April. Wages increased 0.7% in May, which can raise concerns for the Federal Reserve, which has been struggling to fight inflation.

Disposable personal income, which is calculated after paying taxes, rose 0.5% in May. The personal savings rate also rose 3.9% in May after increasing 3.7% in April. 

Despite a jump in the personal savings rate, consumers continued to spend. Consumer spending rose 0.2% in May after increasing 0.1% in April. Consumer spending, which accounts for two-thirds of the U.S. economic activity, got a boost from a 0.3% jump in spending on services.

Spending on goods also rebounded in May, increasing 0.2% month over month after a 0.5% decline in April.

The report comes as the Commerce Department said that inflation cooled further in May. The personal consumption expenditure (PCE) remained unchanged in May after increasing 0.3% in April. Year over year, the PCE price index rose 2.6% in May after increasing 2.7% in the prior month.

Inflation increased in the first quarter but finally started easing in April. The Federal Reserve also said that it is planning one 25 basis point rate cut. Market participants are pricing in the first rate cut in September.

Lower borrowing rates will give consumers more spending power, which bodes well for the broader economy.

Our Choices

Given this scenario, we have narrowed our search to four consumer discretionary stocks such as Royal Caribbean Cruises Ltd. RCL, Crocs, Inc. CROX, Interface, Inc. TILE and PVH Corp. PVH that have strong potential for 2024. These stocks have seen positive earnings estimate revisions in the last 60 days. Each of the stocks has a Zacks Rank #1 (Strong Buy) or 2 (Buy).

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' cruise 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 64%. The Zacks Consensus Estimate for current-year earnings has improved 6.1% over the past 60 days. RCL currently sports a Zacks Rank #1.

Crocs, Inc. is one of the leading footwear brands, with a focus on comfort and style. CROX offers a wide variety of footwear products, including sandals, wedges, flips and slides, that cater to people of all ages.

Crocs' expected earnings growth rate for the current year is 6%. The Zacks Consensus Estimate for current-year earnings has improved 2% over the past 60 days. CROX presently has a Zacks Rank #2.

Interface, Inc. is the world's largest manufacturer of modular carpet, 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 18%. The Zacks Consensus Estimate for current-year earnings has improved 12.4% over the past 60 days. TILE presently carries a Zacks Rank #2.

PVH Corp. specializes in designing and marketing branded dress shirts, neckwear, sportswear, jeanswear, intimate apparel, swim products, footwear, handbags and related products. PVH's brands are sold globally at various price points and in channels of distribution.

PVH Corp's expected earnings growth rate for the current year is 5.2%. The Zacks Consensus Estimate for current-year earnings has improved 2.8% over the past 60 days. PVH presently carries a Zacks Rank #2.

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