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Top 5 Consumer Discretionary Stocks Defying Market Volatility

Wall Street has remained rangebound since April barring 2-3 days of rally or decline. Market participants are clueless about the health of the U.S. economy. Although several economic indicators have fallen substantially in 2023, the labor market remains resilient. Moreover, inflation is well above the Fed’s 2% target rate despite a massive 5% hike in interest rate from March 2022 to May 2023.

A large section of economists and financial experts have warned about a recession later this year. Despite a recessionary threat, a handful of consumer discretionary stocks look promising at this stage.

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.

On the other hand, the consumer discretionary sector has flourished so far in 2023. This sector is generally recognized as a growth-oriented sector. Notably, growth sectors are highly sensitive to the movement of market interest rate and are inversely related.

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The consumer discretionary sector suffered a big blow in 2022 as the Fed pursued an aggressive interest rate hike and tighter monetary control policy in order to control the 40-year high inflation. However, the magnitude of rate hike has reduced to quite an extent in 2023 as the inflation rate has declined steadily from its peak in June 2022.

Moreover, in his May FOMC meeting statement, Fed Chairman Jerome Powell indicated that the interest rate hike cycle has perhaps reached its end. Consequently, a growth sector like consumer discretionary has regained its lost glory.

Year to date, the Consumer Discretionary Select Sector SPDR (XLY) — one of the 11 broad-sector ETFs of the S&P 500 Index — has rallied 16.5%.

Our Top Picks

We have narrowed our search to five consumer discretionary stocks that have strong potential for the rest of 2023. These stocks have seen positive earnings estimate revisions in the last 30 days. Each of our picks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The chart below shows the price performance of our five picks year to date.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Las Vegas Sands Corp. LVS has been benefiting from a solid business model, extensive non-gaming revenue opportunities, high-quality assets, and attractive property locations. LVS is optimistic about Macao’s recovery on the back of resilient customer demand and spending.

With the easing of restrictions coupled with a recovery in travel and tourism, LVS anticipates generating strong cash flows from the region in the days ahead. Also, management emphasized increasing investment in the Singapore market and boosting offerings throughout 2023.

Zacks Rank #2 Las Vegas Sands has expected revenue and earnings growth rates of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 23% over the last 30 days.

Skechers U.S.A. Inc. SKX has been benefiting from its enhanced digital capabilities. Investments made to integrate store and digital ecosystems for developing a seamless omnichannel experience are also driving growth for SKX.

In first-quarter 2023, revenues and earnings exceeded the Zacks Consensus Estimate and improved year over year on higher direct-to-consumer and wholesale sales. International sales increased 21.1% year over year, accounting for 63% of the overall sales in the quarter. SKX is witnessing solid demand for its comfort technology products.

Zacks Rank #1 Skechers U.S.A.  has an expected revenue and earnings growth rate of 7.5% and 31.9%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.6% over the last seven days.

Royal Caribbean Cruises Ltd. RCL has been benefiting from strong close-in bookings at higher prices and continued strength of onboard spending driving load factors. Considering the extension of the WAVE season and solid pent-up demand, RCL raised its 2023 guidance. RCL expects adjusted EPS to be $4.40-$4.80, up from the previously stated $3-$3.60.

Zacks Rank #2 Royal Caribbean Cruises has an expected revenue and earnings growth rate of 47.9% and more than 100%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 9.9% over the last seven days.

Cinemark Holdings Inc. CNK Is a leader in the motion picture exhibition industry. CNK operates 408 theatres and 4,657 screens in 38 states in the United States and internationally in 12 countries, mainly in Mexico, South and Central America.

Zacks Rank #2 Cinemark has an expected revenue and earnings growth rate of 19.1% and more than 100%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 54.5% over the last seven days.

Marriott International Inc. MAR is benefiting from its focus on expansion initiatives, digital innovation and the loyalty program. MAR is gaining from reopening international borders and leniency in travel restrictions resulting in robust leisure demand along with business and cross-border travel improvements. MAR is consistently trying to expand its worldwide presence and capitalize on the demand for hotels in international markets.

Zacks Rank #1 Marriott International has an expected revenue and earnings growth rate of 12% and 24.5%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 7.3% over the last 30 days.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Marriott International, Inc. (MAR) : Free Stock Analysis Report

Royal Caribbean Cruises Ltd. (RCL) : Free Stock Analysis Report

Skechers U.S.A., Inc. (SKX) : Free Stock Analysis Report

Las Vegas Sands Corp. (LVS) : Free Stock Analysis Report

Cinemark Holdings Inc (CNK) : Free Stock Analysis Report

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Zacks Investment Research