Consumer cyclical companies tend to perform well during an economic boom because the demand for such products and services tends to be high during periods of economic expansion. Although U.S. GDP declined in the last quarter, the labor market has remained strong.
The number of people receiving unemployment benefits fell to its lowest level since 1970. Therefore, a hot job market should drive consumer demand to near-record highs across several sectors, including retail, automobile, travel, and leisure.
Given this backdrop, we think it could be wise to buy the price dip in fundamentally sound consumer cyclical stocks Boyd Gaming Corporation (BYD), Carter's, Inc. (CRI), Group 1 Automotive, Inc. (GPI), PulteGroup, Inc. (PHM), and InterContinental Hotels Group PLC (IHG).
Boyd Gaming Corporation (BYD)
Las Vegas-based BYD and its subsidiaries operate as a multi-jurisdictional gaming company. It operates through three segments: Las Vegas Locals; Downtown Las Vegas; and Midwest & South. Currently, the company operates some 28 gaming entertainment properties.
On April 26, 2022, BYD's President and CEO Keith Smith said, "We took an important step in advancing our online gaming strategy with our agreement in March to acquire Pala Interactive, which will provide us the technology and expertise to build a leading regional online casino gaming operation."
BYD's total revenues increased 14.3% year-over-year to $860.74 million in its fiscal 2022 first quarter, ended March 31, 2022. Its adjusted earnings came in at $157.54 million, up 49.1% year-over-year. Also, its adjusted EPS was $1.40, up 50.5% year-over-year. The company's operating income was $251.06 million, up 29.6% year-over-year.
Analysts expect BYD's revenue to increase 3.2% year-over-year to $3.48 billion in 2022. Its EPS is estimated to increase 43.9% per annum over the next five years. In addition, it has surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past month, the stock has declined 10.5% in price to close yesterday's session at $59.62.
BYD's strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which indicates a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
BYD has an A grade for Quality and a B grade for Value and Sentiment. Within the Entertainment - Casinos/Gambling industry, it is ranked #3 of 31 stocks. Click here to see additional POWR Ratings for Growth, Momentum, and Stability for BYD.
Note that BYD is one of the few stocks handpicked currently in the Reitmeister Total Return portfolio. Learn more here.
Carter's, Inc. (CRI)
CRI and its subsidiaries design, source, and market branded childrenswear under the Carter's, OshKosh, Skip Hop, Child of Mine, Just One You, Simple Joys, Carter's My First Love, little planet, and other brands in the United States and internationally. The Atlanta, Ga., company operates through three segments: U.S. Retail; U.S. Wholesale; and International.
On April 29, 2022, Michael D. Casey, Chairman, and CEO, said, "We are encouraged by the improving trend in births in the United States which began last summer. We believe our leading position in the young children's apparel market and unparalleled multi-channel business model will enable us to build on our strong performance last year and achieve our growth objectives for 2022."
CRI's net sales for U.S. wholesale increased 8.5% year-over-year to $307 million for its 2022 first quarter, ended April 2, 2022. Its international net sales came in at $108 million, up 11.3% year-over-year. Furthermore, its long-term debt came in at $496.10 million for the period ended April 2, 2022, compared to $989.98 million for the period ended April 3, 2021.
For its fiscal 2023, analysts expect CRI's revenue to be $3.70 billion, representing a 3.3% year-over-year rise. The company's EPS is also expected to increase 32.1% to $2.55 for the quarter ended Sept. 30, 2022. It surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past month, the stock has declined 5% in price to close yesterday's session at $85.93.
CRI's POWR Ratings reflect this promising outlook. The stock has a B grade for Value and Quality.
Click here to see CRI's ratings for Growth, Momentum, Stability, and Sentiment as well. Again, CRI is ranked #48 of 67 stocks in the A-rated Fashion & Luxury industry.
Group 1 Automotive, Inc. (GPI)
GPI operates in the automotive retail industry. The Houston, Tex., company sells new and used cars, light trucks, and vehicle parts. The company owns and operates approximately 200 automotive dealerships, 266 franchises, and 45 collision centers that offer 34 brands of automobiles.
On April 4, 2022, GPI announced the acquisition of Larry H. Miller Toyota in Albuquerque, New Mexico. The deal is expected to multiply the company's future revenue and profits.
GPI's total revenues increased 30.1% year-over-year to $3.84 billion for the first quarter, ended March 31, 2022. Its net income came in at $202.90 million, up 99.1% year-over-year, while its EPS came in at $11.88, up 115.2% year-over-year.
For its fiscal year 2022, GPI's revenue is expected to increase 19.4% to $16.09 billion in 2022. Its EPS is estimated to increase 14.2% to $40.01 in 2022. It surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past six months, the stock has declined 4.6% in price to close yesterday's session at $189.01.
GPI's strong fundamentals are reflected in its POWR ratings. The stock has an overall B rating, which equates to a Buy in our proprietary rating system.
In addition, it has an A grade for Value and a B grade for Growth. Click here to see the additional POWR Ratings for GPI (Stability, Sentiment, Momentum, and Quality). GPI is ranked #5 of 24 stocks in the B-rated Auto Dealers & Rentals industry.
PulteGroup, Inc. (PHM)
Atlanta, Ga.-based PHM engages primarily in the home building business in the United States. It acquires and develops land primarily for residential purposes, and constructs housing on such land. It currently operates 228,296 lots, of which 109,078 are owned, and 119,218 are under land option agreements.
On April 28, 2022, PHM's President Ryan Marshall said, "Within today's dynamic housing market, we remain disciplined in our operating practices and allocation of capital and remain focused on achieving high returns on our investments."
PHM's total revenues increased 16.8% year-over-year to $3.19 billion for the first quarter, ended March 31, 2022. Its net income came in at $454.72 million, up 49.5% year-over-year. The company's EPS came in at $1.83, up 61.9% year-over-year.
For its fiscal year 2022, PHM's revenue is expected to grow 21.3% year-over-year to $16.89 billion. Its EPS is also estimated to increase 58.2% to $2.88 for the quarter ended Sep. 30, 2022. It surpassed EPS estimates in three of the trailing four quarters. And over the past three months, the stock has declined 5.9% in price to close yesterday's session at $45.86.
PHM has an overall B rating, which equates to a Buy in our proprietary rating system. In addition, it has a B grade for Growth, Sentiment, and Quality.
Click here to see the additional POWR Ratings for PHM (Value, Stability, and Momentum). PHM is ranked #2 of 24 stocks in the B-rated Homebuilders industry.
InterContinental Hotels Group PLC (IHG)
Headquartered in Denham, U.K., IHG owns, manages, franchises, and leases hotels in the Americas, Europe, Asia, the Middle East, Africa, and Greater China. It operates approximately 5,991 hotels and 880,327 rooms in approximately 100 countries.
On April 27, 2022, IHG opened its 146th Holiday Inn Express property in the United Kingdom. Ilhan Kose, General Manager of Holiday Inn Express Cambridge West – Cambourne, said, "We appreciate the support we've received from our local community, and we're relishing the opportunity to welcome guests for both business and leisure and the whole team has been so appreciative of the local support we have received so far."
IHG's revenue came in at $1.39 billion, up 40.1% year-over-year, for the year ended December 31, 2021. Its operating profit came in at $534 million, up 143.8% year-over-year, while its adjusted EPS came in at 147 cents, up 369.6% year-over-year.
IHG's revenue is expected to increase 32.4% year-over-year to $1.84 billion for the fiscal period ending Dec. 31, 2022. Its EPS is estimated to increase 32.7% per annum for the next five years. Over the past month, the stock has declined 3.5% to close yesterday's session at $66.49.
IHG has an overall B rating, which equates to Buy in our POWR Ratings system. It has a B grade for Growth, Sentiment, and Quality. It is ranked #2 of 22 stocks in the Travel - Hotels/Resorts industry. Click here to check additional ratings for IHG (Value, Momentum, Stability).
BYD shares were trading at $58.03 per share on Thursday afternoon, down $1.59 (-2.67%). Year-to-date, BYD has declined -11.10%, versus a -13.12% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.
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