3 Leisure Stocks Set To Beat Estimates This Earnings Season

The leisure industry, which comprises companies providing recreational services such as swimming pools, golf courses, boats, outdoor spaces, cruises, travel etc., primarily thrives on overall economic growth and consumer spending.

A steady rise in wages, lower unemployment and upbeat consumer confidence indicate that leisure stocks are poised to record handsome gains. This is because these stocks are part of a cyclical industry where demand for goods and services is relatively elastic and any significant change in the general market affects consumers’ preference.

Will the Leisure Space Gain From Economic Growth?

Per the advance estimate reported by the Bureau of Economic Analysis, gross domestic product (GDP) increased at an annualized rate of 3.5% in the third quarter, compared with 4.2% growth in the second quarter.

While real GDP was favored by increased personal consumption expenditures (PCE), private inventory investment, state and local government spending, federal government spending, and non-residential fixed investment, it was slightly affected by a downturn in exports and a deceleration in non-residential fixed investment.

Meanwhile, Federal Reserve raised its outlook on U.S. economic growth. Current year economic growth is currently estimated to be 3.1%. This is likely to support the industry’s growth in 2018.

Speed Breakers on the Way

Despite an upbeat consumer spending scenario, a few concerns remain. The Consumer Discretionary Sector, encompassing all the leisure sub-industries, has underperformed the S&P 500 over the past year. The sector gained 0.3% in the past year compared with the S&P 500’s rally of 3.3%.

The tricky nature of discretionary spending has been weighing on the sector’s performance. Also, tariff concerns have been affecting the stocks in the leisure space of late. Moreover, Trump’s stringent policies on immigration and tourist visas seem to have compelled international visitors to rethink their vacation plans to the United States. There has been a continued slowdown in U.S.-bound air travel bookings ever since Trump took charge. Also, online searches by prospective travelers to the United States have declined sharply.