3 Consumer Discretionary Stocks Breaking Out This Quarter

The resilience of consumer spending has positioned the U.S. as a critical driver of global growth, attracting attention from investors looking for opportunities in this sector. Hence, it might be an ideal time to explore quality consumer discretionary stocks eBay Inc. (EBAY), PulteGroup, Inc. (PHM), and Expedia Group, Inc. (EXPE), which are set to capitalize on these trends and deliver strong returns.

The Consumer Price Index increased by 3.7% for the year ending in September, matching August's gain and slightly exceeding economists' expectations of 3.6%. Nevertheless, underlying inflation trends are aligning with the Federal Reserve's goals as it continues its campaign of rate hikes initiated in March 2022 to combat inflation.

Additionally, the Federal Reserve implemented its first interest rate cut last month since the early days of the COVID pandemic, reducing benchmark rates by 50 basis points to a range of 4.75%-5%. The Fed indicated potential further cuts of 50 basis points by the end of the year, projecting a total reduction of around 2% points by 2026.

Furthermore, the International Monetary Fund (IMF) recently stated that the U.S. economy will be a key driver of global growth through 2024 and 2025, bolstered by strong consumer spending despite high inflation and interest rates. The IMF raised its economic growth forecasts for the U.S., marking it as the only developed economy with upward adjustments for both years, indicating that the Federal Reserve's aim for a "soft landing" to ease inflation without harming the job market has largely been achieved.

With these economic indicators in play, let's explore three Consumer Discretionary stocks that are poised for significant growth this quarter.

eBay Inc. (EBAY)

EBAY operates marketplace platforms that connect buyers and sellers in the United States and internationally. The company’s marketplace platforms include eBay.com and the eBay suite of mobile apps. They enable users to list, buy, and sell various products.

On October 18, EBAY launched a special collaboration project car to celebrate the McLaren Formula 1 Team's success in the 2024 season. This modified classic American muscle car features parts sourced from eBay’s marketplace and debuted as McLaren returned to the U.S. following their inaugural win in Miami.

In the fiscal second quarter that ended June 30, 2024, EBAY’s net revenues increased 1.3% year-over-year to $2.57 billion. Its gross profit rose marginally year-over-year to $1.84 billion. Also, its non-GAAP net income from continuing operations stood at $602 million and 1.18 per share, up 8.5% and 14.6% over the prior-year quarter, respectively.

Analysts expect EBAY’s EPS for the quarter ended September 30, 2024, to increase 14.5% year-over-year to $1.18. Its revenue for the same quarter is expected to rise 1.8% year-over-year to $2.54 billion. It surpassed the Street EPS and revenue estimates in each of the trailing four quarters, which is impressive.

Over the past year, the stock has gained 55.4% to close the last trading session at $63.32. It soared 45.2% on a YTD basis.

EBAY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

EBAY has an A grade for Quality and a B for Momentum. It is ranked #18 among 53 stocks in the B-rated Internet industry.

Access EBAY additional grades for Growth, Value, Stability, and Sentiment here.

PulteGroup, Inc. (PHM)

PHM engages in the homebuilding business in the United States. It acquires and develops land primarily for residential purposes and constructs housing on such land. The company also offers various home designs under the Centex, Pulte Homes, Del Webb, DiVosta Homes, American West, and John Wieland Homes and Neighborhoods brand names.

On October 2, PHM paid a quarterly cash dividend of $0.20 per share. The company pays $0.80 annually, which translates to a yield of 0.55% on the prevailing price level. Its four-year average dividend yield is 1.01%. The company has raised its dividend payouts at a CAGR of 12.6% and 12.7% over the past three and five years. Moreover, the company boasts a six year record for consecutive years of dividend growth.

PHM’s total revenues for the fiscal second quarter that ended on June 30, 2024, increased 9.8% year-over-year to $4.60 billion. The company’s net income came in at $809.13 million, representing a 12.3% year-over-increase, while its EPS grew 19.3% over the prior-year quarter to $3.83.

Street expects PHM’s revenue for the quarter ended September 2024 to increase 8.9% year-over-year to $4.68 billion. It surpassed the consensus EPS estimates in each of the trailing four quarters.

Over the past year, the stock has gained 92.1% to close the last trading session at $133.81. It climbed 29.6% year-to-date.

PHM’s alluring outlook is reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.

PHM has an A grade for Momentum and a B for Quality. It is ranked #5 out of 22 stocks in the Homebuilders industry.

To see PHM’s additional grades for Growth, Sentiment, Value, and Stability, click here.

Expedia Group, Inc. (EXPE)

EXPE is a global online company operating through three segments: B2B; B2C; and Trivago. Its extensive portfolio of brands includes Expedia, Hotels.com, Vrbo, Orbitz, CheapTickets, ebookers, Hotwire, and CarRentals.com.

During the fiscal second quarter that ended June 30, 2024, EXPE’s revenue increased 6% year-over-year to $3.56 billion, and its operating income came in at $451 million, increasing 1.8% year-over-year. Moreover, the company’s adjusted attributable net income and EPS amounted to $469 million and $3.51, rising by 9.6% and 21.5% year-over-year, respectively. Also, its adjusted EBITDA stood at $786 million, up 5.2% year-over-year.

For the fiscal third quarter (ended September 2024), the market projects EXPE’s revenue to increase 4.6% year-over-year to $4.11 billion. Its EPS for the same quarter is expected to grow 13% from the prior year to $6.11. Moreover, the company topped the EPS and revenue estimates in all of the trailing four quarters.

The stock has soared 72.1% over the past year and 11.9% over the past month to close the last trading session at $161.19.

EXPE’s POWR Ratings reflect its robust fundamentals. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.

It has an A grade for Quality and a B for Growth and Value. In the Internet industry, it is ranked #2.

Beyond what is stated above, we have also rated EXPE for Momentum, Stability, and Sentiment. Get all the EXPE ratings here.

EBAY shares were trading at $64.16 per share on Wednesday morning, up $0.84 (+1.33%). Year-to-date, EBAY has gained 49.33%, versus a 23.43% rise in the benchmark S&P 500 index during the same period.

Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.

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