After wrapping 2021 with big gains, Wall Street commenced the New Year on a solid note. Investors are betting on a steady economic recovery and remain bullish about business prospects despite concerns related to the coronavirus and inflation. Impressively, the S&P 500 index hit a 52-week high of 4,818.62 on Jan 4, 2022. Evidently, the increasing risk appetite among investors and the overall monetary policy should support the market to post the fourth successive year of positive returns in 2022.
A famous adage tells, “As goes January, so goes the year.”
Given Wall Street’s New Year euphoria, some market pundits are of the opinion that increasing vaccination rates, easing supply pressures, rising wages and higher consumer spending coupled with pent-up demand will further elevate equity gains. Looking at the calendar-year picture for the S&P 500 index, earnings are expected to increase 8.7% on 7.4% higher revenues in 2022, per the latest Zacks Earnings Outlook article.
Meanwhile, the Federal Reserve has raised its 2022 real GDP forecast to 4% from 3.8%. The Jerome Powell-led Fed now envisions the unemployment rate to be 3.5% in 2022, down from the prior estimate of 3.8%. Clearly, a favorable economic backdrop bodes well for the Retail-Wholesale sector. The sector’s prospects are correlated with the purchasing power of consumers. Consumer spending activity, which is one of the pivotal factors driving the economy, has been strong.
According to the Earnings Outlook article, the Retail – Wholesale sector is anticipated to witness top-line growth of 7.2% year over year with the bottom line expected to increase 13% in 2022. Impressively, the sector currently carries a Zacks Sector Rank #2 and occupies a position in the top 13% of 16 Zacks sector list.
That said here we have highlighted four stocks from the Retail-Wholesale sector that have a Zacks Rank #1 (Strong Buy) or 2 (Buy) and are ready to help steer S&P 500 index to new highs. You can see the complete list of today’s Zacks #1 Rank stocks here.
One-Year Price Performance
Image Source: Zacks Investment Research
4 Prominent Picks
Tapestry, Inc. TPR, the provider of luxury accessories and branded lifestyle products, is a potential pick. The company has been benefiting from the successful execution of the Acceleration Program. The program aims to transform the company into a leaner and more responsive organization. It intends to build significant data and analytics capabilities, focusing on enhancing digital and omni-channel capabilities and operating with a clearly defined path and strategy for each of its brands, namely Coach, Kate Spade, and Stuart Weitzman.
Tapestry has a trailing four-quarter earnings surprise of 29%, on average. This Zacks Rank #1 company has an estimated long-term earnings growth rate of 12.3%. The Zacks Consensus Estimate for Tapestry’s current and next financial year sales suggest growth of 14.8% and 4.8%, respectively, from the year-ago period.
We suggest investing in Ulta Beauty, Inc. ULTA. The company has been strengthening its omni-channel business and exploring the potential of both physical and digital facets. It has been undertaking various tools to enhance guests’ experience, like offering a virtual try-on tool and in-store education, and reimagining fixtures, among others. Ulta Beauty focuses on offering customers a curated and exclusive range of beauty products through innovation.
Impressively, this beauty retailer and the premier beauty destination for cosmetics, fragrance, skincare products, hair care products and salon services has a trailing four-quarter earnings surprise of 76%, on average. This Zacks Rank #1 company has an estimated long-term earnings growth rate of 16.5%. Also, the Zacks Consensus Estimate for Ulta Beauty’s current and next financial year sales suggest growth of 39.8% and 6.9%, respectively, from the year-ago period.
Target Corporation TGT is also a solid bet. The company has been making investments to enhance omni-channel capabilities, develop new brands, refurbish stores and expand same-day delivery options to provide a seamless shopping experience to customers. Markedly, this general merchandise retailer has been making multiple changes to its business model to adapt and stay relevant in the ever-evolving retail landscape.
Impressively, Target has a trailing four-quarter earnings surprise of 19.7%, on average. This Zacks Rank #2 company has an estimated long-term earnings growth rate of 14.4%. The Zacks Consensus Estimate for Target’s current and next financial year sales suggest growth of 13.9% and 2.3%, respectively, from the year-ago period.
You may invest in Costco Wholesale Corporation COST. The company’s growth strategies, better price management, decent membership trends and increasing penetration of e-commerce business have been contributing to its performance. Cumulatively, these factors have been aiding this operator of membership warehouses in registering an impressive comparable sales run. Costco has been rapidly adopting the omni-channel mantra to provide a seamless shopping experience, whether online or in stores.
Costco has a trailing four-quarter earnings surprise of 8.3%, on average. This Zacks Rank #2 company has an estimated long-term earnings growth rate of 8.8%. The Zacks Consensus Estimate for Costco’s current and next financial year sales suggest growth of 10.7% and 7.6%, respectively, from the year-ago period.
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