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Three Consumer Discretionary Stocks to Ride Out The Turbulence

consumer discretionary
With expertise in investment evaluation, Muslim Farooque is a respected voice in stock analytics, featured on InvestorPlace, GuruFocus, BarCharts, and Tipranks.
With expertise in investment evaluation, Muslim Farooque is a respected voice in stock analytics, featured on InvestorPlace, GuruFocus, BarCharts, and Tipranks.

On the Agenda

  • Royal Caribbean Cruises RCL : 61.3% year-over-year revenue growth, a 39.4% year-to-date return, and promising analyst projections.
  • General Motors GM : Labor strife, but also: a 25% sales bump in its most recent quarter and a highly-anticipated electric horizon.
  • D.R. Horton DHI : Despite soaring interest rates: A 13% U.S. single-family new home sales market share and a formidable $9.1 billion in home/land sales.

Against the current economic backdrop, a shimmer of optimism peeks through for consumer discretionary stocks, which offer a compelling narrative despite turbulence. Envisioning a future where the much-debated “soft landing” recession becomes a reality, there could be multiple potentially lucrative pathways for investment.

Royal Caribbean Cruises (RCL)

Royal Caribbean has roared back this year on the back of the resurgence in the international cruise sector. With its stock up almost 80% year-to-date, the company is elegantly fortifying its dominant position in its niche.

Its most recent earnings print showed a spectacular showing across both lines. Revenues of $3.52 billion comfortably beat analyst estimates by a noteworthy 3.2%, reflecting a 61.3% year-over-year sales bump.

Peering into the future with an optimistic lens, the company’s promising prospects are likely to take its stock even higher from its current positioning. Truist Securities forecasts industry-wide sales to jump by a robust 55% to 60% compared to 2019 next year and a breathtaking surge exceeding 100% by 2025. Moreover, according to Tipranks consensus estimates, RCL stock is expected to rise by an incredible 39.4% from current price levels.

General Motors (GM)

Automotive giant General Motors is grappling with labor unrest, both in the U.S. and Canada, casting a somber shadow over its manufacturing prowess stock prices. While Canada witnessed over 4,000 workers taking to the picket lines, a timely tentative agreement steered the situation toward calm waters. However, the situation in the U.S. is arguably more complicated, with the United Auto Workers’ demanding a 40% pay hike and a return to traditional pension schemes, causing GM stock to shed more than 12.4% of its value in the past six months.

Following the correction, though, the stock is now attractively priced, trading at roughly 0.3 times forward sales estimates. Beyond the strike’s cacophony, though, GM’s latest quarterly report echoes with optimism. A 25% sales bump, especially when juxtaposed against the current restrictive economic backdrop, is heartening. Adding a cherry on top, GM’s 2024 horizon looks electrically charged. With its EV offerings garnering praise from market experts, the company has six EVs gracing the market and promises more electrifying entries soon.

D.R. Horton (DHI)

Navigating through the ebbing tides of market fluctuations, D.R. Horton remains a juggernaut in the U.S. homebuilding sector. Its stock, however, has taken a hammering, shedding more than 20% in value amidst looming fears of persistently higher interest rates and the sustainability of consumer purchasing power. Despite the turbulence, there is plenty to look forward to with the company, embodied by the housing market supply shortfall and a burgeoning demand for new domiciles.

Furthermore, D.R. Horton showcases a diversified home portfolio, ranging from modestly priced $200,000 homes to opulent $1 million estates spread across a sprawling 33-state canvas. This expansive presence fortifies its dominant stance, maintaining a 13% market share in U.S. single-family new home sales as per the third quarter. Even amid economic adversities, including towering borrowing costs, the company is on an impressive growth trajectory in home sales and backlogs, underscoring its inherent market resilience and prowess.

Moreover, its most recent quarter saw home and land sales touching a formidable $9.1 billion, juxtaposed with a healthy gross margin of 23.2%. Furthermore, net sales orders for the latest quarter were inked at $8.7 billion, reflecting a substantial 26% year-over-year growth.

 On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Guidelines.

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