4 Leisure Stocks Poised To Beat Earnings Estimates In Q4

The leisure industry is widely diversified in nature and primarily thrives on overall economic growth and consumer spending. It houses companies providing recreational products and services such as swimming pools, golf courses, boats, outdoor spaces, cruises and travel to name a few. Demand for such services is relatively elastic.

Notably, steady rise in wages, lower unemployment and upbeat consumer confidence bode well for leisure stocks. Given the favorable economic scenario, one can expect these companies to benefit from increased consumer demand in the quarter to be reported.

Also, higher personal expenditure and, improved demand for leisure products and services are aiding the leisure industry of late. Per National Marine Manufacturers Association, boat manufacturers are continuously increasing production to support high demand. Rise in demand for powerboats, including small sterndrive, wakeboard boats and smaller fiberglass boats with jet technology is expected to boost the performance of leisure industry players in the fourth quarter of 2018. Cruise companies are likely to gain from solid booking and pricing trends in the same time frame.

However, tariff remains a concern for key players in this space. Moreover, since most companies within the leisure and recreation service space heavily rely on debt-financing because of the capital-intensive nature of their businesses, the rising interest rate environment might prove detrimental to them.

Q4 Expectations

The majority of the Zacks sectors (13 out of 16) is expected to perform well in the fourth quarter of 2018. The leisure industry, which is part of the broader Zacks Consumer Discretionary sector, seems to be on a solid footing as well. According to the latest Earnings Preview, the sector’s aggregate fourth-quarter EPS is expected to increase 9.5% compared with 20.2% in the last reported quarter. Revenues are anticipated to increase 4.6%, lower than 6.4% in the third quarter.

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