3 Consumer Discretionary Stocks Capitalizing on Spending Trends

The consumer discretionary sector is capitalizing on robust consumer spending trends by leveraging innovative digital strategies and premium brand experiences. As economic conditions improve and consumer confidence rises, companies in this sector benefit from increased demand for non-essential goods and services.

Amid this backdrop, investors could consider looking into fundamentally sound discretionary stocks, such as Lowe's Companies, Inc. (LOW), Ferrari N.V. (RACE), and O'Reilly Automotive, Inc. (ORLY), which continue to exhibit promising growth potential.

As per the U.S. Bureau of Labor Statistics, for fiscal 2024, the Consumer Prices Index (CPI) grew 2.9% compared to the previous year. In the fourth quarter of 2024, consumer spending in the United States increased to $16.28 billion from $16.11 billion in the third quarter of 2024. This increased spending benefits companies in the consumer discretionary sector, as higher demand for products like apparel, electronics, and leisure activities drives revenue growth.

Moreover, global spending trends have created opportunities for consumer discretionary stocks to expand into emerging markets. Rising incomes and urbanization in regions like Asia and Latin America are driving demand for premium products and experiences. Also, total consumer spending should rise at a moderate pace in 2025, fueled by jobs, wage increases exceeding inflation, and past asset growth.

Considering these encouraging trends, let’s take a look at the fundamentals of the three consumer discretionary stocks.

Lowe's Companies, Inc. (LOW)

LOW is a home improvement company that offers a line of 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.

In terms of the trailing-12-month net income margin, LOW’s 8.19% is 96% higher than the 4.18% industry average. Similarly, its 15.32% trailing-12-month levered ROTA is 309.2% higher than the industry average of 3.74%. Also, its trailing-12-month ROTC of 25.12% compares to the industry average of 6.16%.

In the fiscal third quarter that ended on November 1, 2024, LOW’s net sales amounted to $20.17 billion. The company reported operating income of $2.54 billion. In addition, its net earnings came in at $1.69 million, and its EPS stood at $2.99.

Analysts expect LOW’s revenue and EPS for the current year (ended January 2025) to be $83.35 billion and $11.91, respectively. For the fiscal year 2026, its revenue and EPS are expected to grow by 1.6% and 4.8% from the prior year to $84.69 billion and $12.49, respectively.

The stock has gained 8.9% over the past month to close the last trading session at $250.26.

LOW’s POWR Ratings reflect this robust outlook. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

LOW has a B grade for Sentiment and Quality. It is ranked #9 out of 56 stocks in the B-rated Home Improvement & Goods industry. Click here to see the additional ratings for LOW (Growth, Value, Momentum, and Stability).

Ferrari N.V. (RACE)

Based in Maranello, Italy, RACE engages in the design, engineering, production, and sale of luxury performance sports cars worldwide. It also provides spare parts, engines, after-sale services, repair, maintenance, and restoration services for cars. It licenses its Ferrari brand to various producers and retailers of luxury and lifestyle goods.

The stock’s trailing-12-month net income margin of 22.85% is 447.3% higher than the industry average of 4.18%. Similarly, its 47.58% trailing-12-month ROCE is 338.9% above the industry average of 10.84%. Also, its trailing-12-month ROTA of 15.79% compares favorably to the industry average of 3.74%.

RACE’s net revenues for the fiscal fourth quarter that ended December 31, 2024, increased 14% year-over-year to €1.74 billion ($1.80 billion). Its operating profit grew 25.8% from the year-ago value to €468 million ($485 million) with an operating profit margin of 27% (up 260 bps year-over-year).

The company’s EBITDA rose 15.2% from the prior-year quarter to €643 million ($666.88 million). Moreover, its net profit came in at €386 million ($400.34 million), indicating a 31.3% growth from the prior-year quarter period, and its EPS was €2.14 per share, up 32.1% year-over-year.

The consensus revenue estimate of $1.85 billion for the fiscal first quarter (ending March 2025) represents an 8.3% increase year-over-year. The consensus EPS estimate of $2.36 for the about-to-be-reported quarter indicates a 12.6% improvement year-over-year. The company has an excellent surprise history; it surpassed the consensus revenue and EPS estimates in each of the trailing four quarters.

Over the past year, the stock has gained 24.6%, closing the last trading session at $482.55.

RACE’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.

It also has an A grade for Quality and a B for Stability and Sentiment. Within the Auto & Vehicle Manufacturers industry, it is ranked #13 out of 46 stocks. Click here to see RACE’s ratings for Growth, Value, and Momentum.

O'Reilly Automotive, Inc. (ORLY)

ORLY is a specialty retailer of automotive aftermarket parts, tools, supplies, equipment, and accessories, serving the do-it-yourself and professional service provider markets. Its offerings include new and remanufactured automotive hard parts and maintenance items, such as alternators, batteries, brake system components, belts, chassis parts, driveline parts, engine parts, fuel pumps, etc.

ORLY's trailing-12-month ROTC and ROTA of 32.12% and 16.02% are 421.4% and 328.1% higher than their respective industry averages of 6.16% and 3.74%. Likewise, its trailing-12-month net income margin of 14.28% is 242.1% above the industry average of 4.18%.

For the fourth quarter of fiscal 2024, which ended on December 31, ORLY’s sales increased 6.9% from the prior year’s quarter to $4.09 billion, while its operating income was reported at $738.65 million, up 2.8% year-over-year. The company’s EBITDAR came in at $4.21 billion, reflecting an increase of 3.5% from the prior year's period.

Additionally, ORLY’s attributable net income stood at $551.13 million, while its earnings per share came in at $9.50, up 2.6% year-over-year. Its free cash flow amounted to $330.68 million, indicating a 29.2% growth from the prior-year quarter period.

Street expects ORLY’s revenue for the fiscal first quarter (ending March 2025) to increase by 5.1% year-over-year to $4.18 billion. Moreover, its EPS estimate of $9.88 for the same period indicates a 7.4% year-over-year growth.

Shares of ORLY have gained 29.9% over the past nine months and 18.1% over the past six months to close the last trading session at $1,324.30.

ORLY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.

ORLY has an A grade for Quality and a B for Stability. It is ranked #24 out of 60 stocks in the A-rated Auto Parts industry. Click here to access ORLY’s additional ratings for Growth, Value, Momentum, and Sentiment.

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LOW shares were trading at $252.82 per share on Thursday afternoon, up $2.56 (+1.02%). Year-to-date, LOW has gained 2.89%, versus a 3.80% rise in the benchmark S&P 500 index during the same period.

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