Inflation appears to be at a standstill or, in some cases, even reversing. A closely watched measure of underlying price increases, an index excluding volatile categories, remained stagnant for months.
In this backdrop, consumer discretionary stocks such as Lowe's Companies, Inc. (LOW), The TJX Companies, Inc. (TJX), and Snap-on Incorporated (SNA), continue to exhibit stable fundamentals and promising growth potential.
The core Consumer Price Index (CPI) for December, a key inflation gauge, showed its first slowdown in months, according to the Bureau of Labor Statistics. This reading, combined with favorable wholesale inflation data, has generated optimism across the markets, with investors hopeful for continued economic stabilization.
While the overall CPI did rise more than anticipated, climbing 0.4% from November, bringing the annual rate to 2.9%, the increase was largely driven by rising gas and food prices, which tend to be more volatile.
On the consumer side, spending surged significantly in December, primarily driven by heightened holiday activity. Consumer expenditure grew by 0.7% compared to the previous month, marking a sharp increase from earlier months. This helped maintain momentum in the U.S. economy during the final quarter of 2024, signaling positive economic prospects.
Additionally, the nation’s GDP grew at an annualized rate of 2.3% in the last quarter of 2024, with overall economic activity increasing by 2.5% from the final months of 2023. This growth highlights the potential for sustained recovery as the economy enters 2025.
In this context, the consumer discretionary sector stands to benefit from the increased demand for non-essential yet desirable goods, especially with a 0.4% rise in income during December.
So, let us dive deep into the fundamentals of three consumer discretionary stocks, starting with #3.
Stock #3: Lowe's Companies, Inc. (LOW)
LOW is a home improvement retailer that offers products for construction, maintenance, repair, remodeling, and decorating. The company also provides home improvement products, such as appliances, seasonal and outdoor living, lawn and garden, lumber, kitchens and baths, tools, and more.
On December 11, 2024, LOW introduced new initiatives to drive growth in its Total Home strategy. The company launched AI-driven frameworks to enhance customer experience and boost productivity, providing more personalized service. These new initiatives could provide greater value to customers and facilitate customer growth.
On November 4, 2024, LOW announced the introduction of Lowe’s Digital Home Platform, which will be exclusively available to MyLowe’s Rewards members. Through this platform, LOW members have access to free, personalized information about products in their homes, including warranties and manuals, maintenance suggestions, and others.
Exclusive rewards like this could enhance the company’s member growth by offering its customers an upside to their purchases, improving LOW’s overall sales in the process.
LOW’s trailing-12-month EBITDA margin of 14.66% is 28.1% higher than the industry average of 28.09%. Its trailing-12-month levered FCF margin of 7.61% is 67% higher than the sector average of 4.56%. Likewise, the stock’s asset turnover ratio of 1.92x is 92.7% higher than the industry average of 1.00x.
For the fiscal 2024 third quarter that ended November 1, LOW’s net sales came in at $20.17 billion. Its operating income was reported to be $2.54 billion. Additionally, the company’s net earnings and earnings per common share amounted to $1.70 billion and $2.99, respectively.
Analysts expect LOW’s revenue and EPS for the fiscal year ending January 2026 to increase 1.6% and 4.8% year-over-year to $84.68 billion and $12.48, respectively. Moreover, the company topped the consensus EPS estimates in all four trailing quarters, which is impressive.
LOW’s shares surged 10.8% over the past nine months and 17.2% over the past year to close the last trading session at $257.23.
LOW’s POWR Ratings reflect its sound fundamentals. The stock has an overall rating of B, translating to a Buy in our proprietary rating system. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree.
LOW has a B grade for Quality. Within the B-rated Home Improvement & Goods industry, LOW is ranked #13 out of 57 stocks.
To access LOW’s Sentiment, Value, Momentum, Growth, and Stability ratings, click here.
Stock #2: The TJX Companies, Inc. (TJX)
TJX is an off-price apparel and home fashions retailer. The company has four segments: Marmaxx; HomeGoods; TJX Canada; and TJX International. It offers family apparel, including footwear and accessories; home fashions, such as home basics, furniture, rugs, lighting products, giftware and more.
Last year, TJX announced a definitive agreement for a joint venture with Grupo Axo, S.A.P.I. de C.V., an operator of global brands in Mexico and South America. The joint venture could enhance the company’s market position in Mexico and Latin American regions, resulting in increased sales figures and stronger cash flows.
TJX’s trailing-12-month EBIT margin of 11.07% is 37.2% higher than the industry average of 8.06%. Its trailing-12-month EBITDA margin of 12.92% is 12.8% higher than the 11.45% industry average. Additionally, the stock’s trailing-12-month net income margin of 8.63% is 98.1% higher than the sector average of 4.36%.
For the fiscal 2025 third quarter that ended November 2, TJX’s net sales increased 6% year-over-year to $14.06 billion. The company’s net income and EPS rose 8.9% and 10.7% from the prior year’s quarter to $1.30 billion and $1.14, respectively.
Street expects TJX’s revenue and EPS for the fiscal year ending January 2026 to increase 5.7% and 9.8% year-over-year to $59.44 billion and $4.60, respectively. Additionally, the company has surpassed consensus revenue and EPS estimates in each of the four trailing quarters, which is impressive.
Shares of TJX surged 10.6% over the past six months and 31.6% over the past nine months to close the last trading session at $125.14.
TJX’s POWR Ratings reflect its robust prospects. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
TJX has a B grade for Quality, Momentum, Sentiment, and Stability. Within the B-rated Fashion & Luxury industry, TJX is ranked #10 out of 59 stocks.
In addition to the POWR Rating highlighted above, you can check TJX’s ratings for Value and Growth here.
Stock #1: Snap-on Incorporated (SNA)
SNA manufactures and markets tools, equipment, diagnostics, and repair information and systems solutions for professional users. The company has four segments: Commercial & Industrial Group; Snap-on Tools Group; Repair Systems & Information Group; and Financial Services.
SNA’s trailing-12-month gross profit margin of 51.69% is 62.1% higher than the industry average of 31.89%. Its trailing-12-month levered FCF margin of 16.04% is 134.5% higher than the sector average of 6.84%. Furthermore, the stock’s trailing-12-month net income margin of 20.40% is 216.1% higher than the 6.46% industry average.
For the fiscal 2024 third quarter that ended September 28, SNA’s net sales amounted to $1.15 billion. Its operating earnings increased 3% from the year-ago value to $324.10 million.
Additionally, net earnings and net earnings per share attributable to SNA rose 3.3% and 4.2% year-over-year to $251.10 million and $4.70, respectively.
The consensus revenue and EPS estimates of $1.21 billion and $4.95 for the fiscal 2025 first quarter (ending in March) reflect a year-over-year rise of 2.5% and 4.2%, respectively. Additionally, the company has surpassed consensus EPS estimates in three of the four trailing quarters.
SNA’s shares have surged 28.6% over the past six months and 21.6% over the past nine months to close the last trading session at $355.75.
SNA’s stable fundamentals are mirrored in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
SNA has an A grade for Quality and a B for Momentum and Stability. Within the Home Improvement & Goods industry, SNA is ranked #9 out of 57 stocks.
Click here to access SNA’s Sentiment, Value, and Growth ratings.
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LOW shares . Year-to-date, LOW has gained 4.68%, versus a 2.68% rise in the benchmark S&P 500 index during the same period.
About the Author: Aritra_Gangopadhyay
Aritra is a financial journalist dedicated to breaking down complex financial topics into simple, actionable insights. Holding a Master’s degree in Economics, he uses his analytical expertise to help investors uncover unique opportunities for long-term success.
3 Consumer Discretionary Stocks Riding the Economic Recovery StockNews.com
