Even as the pandemic continues to wage in second, third and fourth waves (in some regions), vaccination drives remain mostly on course, with a lot of enthusiasm for a strong rebound in economic activity through the rest of the year.
In 2020, consumption patterns moved toward goods, as people avoided services that required them to move outdoors. But pandemic fatigue is a growing phenomenon, and people are more inclined to go out this year than they were in the last.
Businesses are also gearing up with only a small percentage (16%) making vaccination a precondition for joining back. Most employers are strongly encouraging it, but leaving the ultimate decision to the employee. And 77% of businesses expect hiring levels to normalize by the end of the year. Overall, 51% of the workforce is expected to be back in the workplace in the next 6-12 months.
U.S. employers have one of the most encouraging employment outlooks, with employers across all sectors positive about the next three months. Notably, the strongest hiring activity is expected in the Leisure & Hospitality segment, followed by Transportation and Utilities, and then Retail Trade.
Last week’s report from the BLS on the employment situation showed that hiring levels in March were just a couple of points below the pre-pandemic level with leisure and hospitality, public and private education, and construction seeing the biggest gains.
Both sets of data point to increased hiring in leisure and hospitality, which indicates that more people will be moving outdoors. This is a big boost to the retail sector, because it means that people will be buying more apparel, shoes, personal care, beauty, etc while also visiting restaurants and bars more often.
Additionally, the Consumer Confidence Index of 109.7 for March moved to its highest level in a year, jumping from 90.4% in February, with improved purchasing intentions for homes, autos and several big-ticket items. Inflation concerns remain, which may temper spending intentions.
It therefore makes sense to look for retail stocks because we may be able to find some that are still undervalued-
Rush Enterprises, Inc. RUSHA
Rush Enterprises operates the largest network of Peterbilt heavy-duty truck dealerships in North America and John Deere (NYSE:DE) construction equipment dealerships in Texas and Michigan. Its dealerships provide an integrated, one-stop source for the retail sale of new and used heavy-duty trucks and construction equipment; aftermarket parts, service and body shop facilities; and a wide array of financial services.
The Zacks Rank #1 (Strong Buy-ranked) company with a Growth Score A and Value Score A is expected to grow earnings 41.2% this year and 13.5% in the next.
It has topped estimates in each of the last four quarters at an average rate of 417.8%.
And its forward P/E of 16.57X trails the median P/E of 19.69X over the past year, suggesting that the shares are undervalued.
Titan Machinery (NASDAQ:TITN) Inc. TITN
Titan Machinery owns and operates a network of full-service agricultural and construction equipment stores selling both new and used equipment in the United States and Europe. Its product line includes heavy construction machinery, light industrial machinery for commercial and residential construction, road and highway construction machinery, energy and forestry operations equipment, as well as maintenance and replacement parts.
The Zacks Rank #2 (Buy-ranked) company with a Growth Score A and Value Score A is expected to grow earnings 14.3% in its fiscal year 2022 (ending January) and 21.8% in fiscal 2023.
Its EPS surprise history is also good, it has topped estimates in each of the last four quarters at an average rate of 345.8%.
At 17.41X forward earnings, it is trading just below the median value of 17.78X over the past year. So this one is also worth buying.
Travis Perkins (LON:TPK) plc TVPKF
Travis Perkins plc supplies building materials including aggregates, sand and cement; bricks, blocks, lintels and damp proofing; drains and foundations; dry lining and plastering products; and insulation, roofing and sustainable products to the UK's building and construction industry.
It also sells timber, plumbing and heating products; clothing and personal protective equipment; decorative products; electrical products; kitchens and bathrooms; landscaping; and joinery, sheet material, tools, fixings and consumable products. It’s also involved in property management.
The Zacks Rank #2 company with a Growth Score B and Value Score A is expected to grow earnings 14.2% in its fiscal year 2022.
The Zacks Consensus Estimate for 2021 is up 10 cents (8.3%) in the last 90 days.
At 13.60X forward earnings, it is trading just below the median value of 13.61X over the past year. So the stock is worth buying.
Jack in the Box Inc. JACK
Based in San Diego, Jack in the Box Inc. is is one of the nation’s largest hamburger chains that operates and franchises through Jack in the Box quick-service restaurants. As of September 27, 2020, it operated and franchised 2,241 Jack in the Box quick-service restaurants primarily in the western and southern United States, including one in Guam.
The Zacks Rank #2 company with a Growth Score B and Value Score B is expected to grow earnings 37.4% in 2021 (ending September) and 2.1% in 2022.
The company has topped estimates in three of the last four quarters at an average rate of 18.5%.
The Zacks Consensus Estimate for 2021 is up 79 cents (14.1%) in the last 90 days.
At 17.64X forward earnings, the stock trades fairly close to its median value of 17.38X over the past year. So it remains worth buying.
Tempur Sealy (NYSE:TPX) International, Inc. TPX
Tempur Sealy International develops, manufactures and markets bedding products, primarily in North America and internationally. It provides mattresses, adjustable bases, pillows and other sleep and relaxation products. Its brand portfolio includes Tempur(R), Tempur-Pedic(R), Sealy(R), Sealy Posturepedic(R), Optimum(TM) and Stearns & Foster(R).
The Zacks Rank #1 company with a Growth Score A and Value Score C is expected to grow earnings 27.2% in 2021 and 11.1% in 2022.
The company has topped estimates in each of the last four quarters at an average rate of 1,711.82%.
The Zacks Consensus Estimate for 2021 is up 44 cents (22.1%) in the last 90 days.
At 14.98X forward earnings, the stock trades fairly close to its median value of 14.20X over the past year. So it remains worth buying.
3-Month Price Performance
Time to Invest in Legal Marijuana
If you’re looking for big gains, there couldn’t be a better time to get in on a young industry primed to skyrocket from $17.7 billion back in 2019 to an expected $73.6 billion by 2027.
After a clean sweep of 6 election referendums in 5 states, pot is now legal in 36 states plus D.C. Federal legalization is expected soon and that could be a still greater bonanza for investors. Even before the latest wave of legalization, Zacks Investment Research has recommended pot stocks that have shot up as high as +285.9%
You’re invited to check out Zacks’ Marijuana Moneymakers: An Investor’s Guide. It features a timely Watch List of pot stocks and ETFs with exceptional growth potential.
Today, Download Marijuana Moneymakers FREE >>
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
Jack In The Box Inc. (NASDAQ:JACK): Free Stock Analysis Report
Rush Enterprises, Inc. (RUSHA): Free Stock Analysis Report
Travis Perkins PLC (TVPKF): Get Free Report
Tempur Sealy International, Inc. (TPX): Free Stock Analysis Report
Titan Machinery Inc. (TITN): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research