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Consumer Stocks - Vintage Value Investing

Q4 Earnings Season Update

This earnings season has been a story of growth thus far. According to Zack’s Investment Research, 148 members of the S&P 500 have reported as of Thursday, January 26th. Total earnings from these companies have grown 5.9% in Q4 compared to 4.7% in Q3. Overall, S&P 500 member earnings are on pace to reach their highest level in nearly two years.

One sector that has most (positively) surprised investors has been consumer discretionary stocks. So far these companies have reported total earnings growth of 9.3% on 7.5% revenue growth while 75% have beat their estimates. On top of that, CNBC recently reported that consumer sentiment is at its highest level since 2004.

So why not take a look at some fundamentally attractive consumer stocks that could positively surprise investors this week?

6 Consumer Stocks That Could Takeoff On Earnings

According to Yahoo finance, there are 51 companies listed in the consumer discretionary sector expected to report earnings this coming week (1/30 – 2/3). However, only six appear to be trading well below their fair value estimate: Penn National Gaming (Nasdaq:PENN), Murphy USA (NYSE:MUSA), (Nasdaq:FLWS), Ralph Lauren (NYSE:RL), Sally Beauty (NYSE:SBH) and Coach (NYSE:COH).

Penn National is expected to report earnings on Thursday before the market opens while six valuation models conclude a fair value range of $16.50 to $21.12 and $18.94 at the midpoint. This compares to Wall Street’s $17.45 price target derived from eleven analysts which implies 25% upside.


Murphy USA is also expected to report on Thursday but after the market closes. Seven separate valuation analyses imply a fair value of approximately $82.50 – right in line with Wall Street’s target.


Nine cash flow valuation models imply that is 25% undervalued. The company is expected to report earnings on Tuesday before the market opens.


Ralph Lauren is scheduled to report earnings on Thursday before the market opens and the stock is currently trading near its 52-week low. fair value data implies that shares are 24% undervalued while Wall Street’s consensus price target of $104.56 implies nearly 20% upside.


Eight cash flow analyses imply that Sally Beauty is approximately 20% undervalued prior to reporting earnings (expected Thursday). Shares are also trading near their 52-week low.


Coach is scheduled to report earnings on Tuesday before the market opens. The Wall Street consensus price target of $43.28 is slightly above’s fair value estimate of $42.84. Both estimates imply roughly 20% margin of safety.


All these consumer discretionary stocks have strong fundamentals and could easily trade higher following a positive earnings surprise. Value investors may want to take a closer look at these names prior to them reporting.

The Essays of Warren Buffett: Lessons for Corporate America

by Warren E. Buffett, edited by Lawrence A. Cunningham

Buffett, the Bard of Omaha, is a genuine American folk hero, if folk heroes are allowed to build fortunes worth upward of $15 billion. He’s great at homespun metaphor, but behind those catchy phrases is a reservoir of financial acumen that’s generally considered the best of his generation.

The Little Book of Common Sense Investing

by John C. Bogle

“There are a few investment managers, of course, who are very good – though in the short run, it’s difficult to determine whether a great record is due to luck or talent. Most advisors, however, are far better at generating high fees than they are at generating high returns. In truth, their core competence is salesmanship. Rather than listen to their siren songs, investors – large and small – should instead read Jack Bogle’s The Little Book of Common Sense Investing.” – Warren Buffett.