The Census bureau recently reported U.S. retail sales rose a strong 0.6% in February compared to January, reaching $700 billion. Food services and drinking businesses stood out, up 6.3% YOY. Motor vehicle and parts dealers rebounded by 1.6% since January, and building material and garden equipment saw a 2.2% increase. Meanwhile, electronics and appliance store revenues climbed 1.5% since January, and 1.9% YOY. With that data in mind, I chose three consumer momentum stocks that are in one of these “hot” categories, and have been performing well in recent weeks.
Best Buy (BBY)
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Best Buy (NYSE:BBY) is one of the largest consumer-electronics chains in the U.S. Because of this, it should benefit greatly from the steady climb of electronics and appliance stores.
Research firm Canalys recently estimated that 18% of all PCs delivered this year will be AI-capable. I’m sure that Best Buy will be able to charge a considerable price for these AI-capable PCs, with its gross profit margin surpassing that of standard PCs.
Last quarter, Best Buy’s revenue fell slightly, but its earnings per share increased to $2.72 versus $2.61 during the same period a year earlier. BBY shares have risen over 2% YTD.
Yum! Brands (YUM)
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Given the huge number of KFC and Pizza Hut restaurants that Yum! Brands (NYSE:YUM) owns and franchises in the U.S., it should be a big beneficiary of the restaurant segment’s sales gains. What’s more, Yum should benefit from declining wholesale food prices, as the National Restaurant Association is reporting that average food prices were trending lower over the past year.
Yum! did indeed get a lift from the latter trend last year as its core operating profit surged 12%. Meanwhile, its Q4 worldwide system sales increased a healthy 5%, excluding foreign currency fluctuations.
YUM stock has advanced nearly 7% YTD.
General Motors (GM)
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As the leading seller of autos in the U.S., General Motors (NYSE:GM) is well-positioned to benefit from the strength of the motor vehicle and parts dealers sector.
GM recently pleased the Street by reporting Q4 earnings per share of $1.59, well above analysts’ average estimate of $1.24. Moreover, investors were happy that the automaker provided 2024 EBIT guidance, excluding some items, of $12 billion to $14 billion, well above the mean estimate of $11 billion.
GM stock jumped nearly 15% YTD, but the shares still have a very low forward price-earnings ratio of 4.5.
Finally, analysts, on average, expect GM’s EPS to rise to $8.98 this year from $7.88 in 2023.
On the date of publication, Larry Ramer 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 biedexmarkets.com.com Publishing Guidelines.
