4 January Consumer Stock Picks From William Blair

Looking for a consumer stock pick for January? Analysts at William Blair highlighted four in a Tuesday note. 

The Analysts

William Blair's Sharon Zackfia, Jon Andersen, Dylan Carden, Ryan Domyancic, Daniel Hofki and Ryan Sundby.

The Thesis

William Blair's consumer near-term focus list is intended to identify "timely stocks" over a shorter-term period, according to the research firm. The previous list issued in early November rose 11.3 percent on an equal-weighted basis versus a 4-percent increase in the S&P 500 index over the same time period.

TJX Companies

TJX Companies Inc TJX boasts a "reasonable" valuation and is expected to at the very least match Wall Street's expectations in its Feb. 28 earnings report, the analysts said in the report. The off-price retailer could show a 2-percent comp-store sales increase, which implies a sequential improvement on both a one-year and two-year basis.

Any woes the company's experienced in the third quarter have likely been corrected, given management's strong track record of "fixing its rather infrequent execution missteps in fairly short order." Beyond the January-ending quarter, Wall Street's expectations of a 2.4-percent comp increase for the full year 2018 and EPS of $4.22 are "reasonable," if not potentially beatable, according to William Blair.

Royal Caribbean Cruises

Royal Caribbean Cruises Ltd RCL is well-positioned to beat the $1.20 per share Wall Street is expecting in its upcoming earnings report, the analysts said. If the company beats estimates, it would mark the 12th consecutive quarter of earnings upside. Upside to the stock will come from better-than-expected constant-currency net yields versus the company's guidance of 2-2.5 percent given strong close-in demand and onboard spending.

Shares of Royal Caribbean are trading at 14x the firm's 2018 EPS estimate, which implies the stock could "react well" to strong earnings reports and encouraging guidance for the year ahead.

Related Link: Cramer Blasts Goldman Sachs For Being Wrong On Cruise Stocks

Casey's General Stores

Casey's General Stores Inc CASY is already a standout in the convenience store sector given its proprietary food program and differentiated offering, the analysts said. While the company did disappoint the Street in its latest earnings report in December, the poor performance is largely due to "softness across the convenience channel rather than management execution."'

The Street is expecting the weakness to continue, but the company boasts multiple positive catalysts, including a pizza-to-pump promotion and loyalty initiatives, according to William Blair. 

Prestige Brands Holdings

Finally, Prestige Brands Holdings, Inc. PBH stands to benefit from multiple near-term factors, the analysts said:

Data from IRI shows consumption for Prestige Brands grew at a rate of around 1 percent for the 13-week period ending Dec. 17, an improvement from prior readings of zero-percent growth.

A focus on "Invest for Growth" products could generate an annual organic growth rate of 2 to 3 percent.

M&A opportunities still exist from private and public sources.

These factors support the case for outperformance in Prestige Brands' stock over the next 60 days, according to William Blair. 

Related Link:

Prestige Brands Seen As A Prime Takeout Candidate On Cash Flow Strength, Earnings Growth

Photo of Royal Caribbean cruise ships from Wikimedia. 

Posted In: Consumer Stocksconvenience storesCruiseOff Price RetailersSharon ZackfiaWilliam BlairAnalyst ColorAnalyst RatingsTrading Ideas