The U.S. Bureau of Labor Statistics’ Employment Situation report released on Friday revealed an improvement in the country’s job market, evident from the fall in the unemployment rate and increase in the nonfarm payroll employment level.
The unemployment rate stood at 3.6% in March, down from 3.8% in February and 4% in January. Also, the latest employment rate is way below the 14.7% mark recorded in April 2020.
Meanwhile, the nonfarm payroll employment increased by 431,000 in March. The incremental employment totals 1.69 million for the first quarter of 2022, with the monthly average being 562,000.
At this juncture, an industry-wise breakdown of job gains will help us identify the promising industries in the country.
Industry-Wise Job Additions
Per the official data, job additions (nonfarm payroll) in the leisure and hospitality sector stood at 112,000 last month. Notable growths were recorded for the food services and drinking places as well as for the accommodation industries within the sector.
The second-highest job additions, to the tune of 102,000, were done in the professional and business services sector. Job additions in the retail sector grew by 49,000 in March. In addition to these, notable job additions were recorded in manufacturing and other industries.
Long-Term Projections
The U.S. Bureau of Labor Statistics released a report on Employment Projections in September 2021. The Government agency predicted 11.9 million job additions from 2020 to 2030. The prediction suggests a 7.7% increase over the decade.
Of all the sectors, the fastest growth in employment is anticipated to occur in the leisure and hospitality sector.
3 Stocks with Growth Potential
Companies providing leisure and hospitality services are housed under services sector on TipRanks. Among service providers, we have selected stocks from restaurants, and travel & leisure industries.
The selected companies have a Strong Buy consensus rating, a Smart Score within the 8-10 range, a market capitalization of >=$2 billion, and a price target upside of >=5%.
McDonald’s Corporation (NYSE: MCD)
Based in Chicago-IL, the company provides food services in the United States and across multiple other nations through its McDonald’s chain of restaurants and franchises. Over the past year, shares of the $185-billion company have grown 8.9%.
In the fourth quarter of 2021, the company’s adjusted earnings per share increased 31% year-over-year while its total revenues expanded 13%.
In January, McDonald’s President and CEO, Chris Kempczinski, said, “We enter this new year with a clear focus on creating seamless and memorable customer experiences and harnessing our momentum to drive long-term, sustainable growth for all of our stakeholders.”
A few days ago, Dennis Geiger, an analyst at UBS, reiterated a Buy rating on McDonald’s with a price target of $290 (16.35% upside potential).
The company’s Strong Buy consensus rating is based on 20 Buys and three Holds. McDonald’s average price target of $282.73 suggests 13.43% upside from current levels. The burger-specialist scores a ‘Perfect 10’ on the TipRanks Smart Score rating system.
Churchill Downs Incorporated (NASDAQ: CHDN)
The $8.5-billion company provides gaming entertainment, racing, and online wagering services. It is based in Louisville, KY. Over the past year, shares of Churchill Downs have declined 2.6%.
Churchill Downs’ adjusted earnings per share grew 568.4% and its revenues increased 31.1% year-over-year. In the quarters ahead, the company is poised to gain from acquired assets, organic growth investments, and favorable shareholder-friendly policies.
Last month, KeyBanc analyst, Brett Andress, maintained a Buy rating on Churchill Downs while increasing the price target to $300 (34.61% upside potential) from $270. The analyst believes “Churchill Downs’ attractive organic growth narrative remains a key point of differentiation.”
The Strong Buy consensus rating on the company is based on five Buys. Churchill Downs’ average price target of $278.60 mirrors upside potential of 25.01% from current levels. It scores a 9 out of 10 on Tipranks’ Smart Score rating system.
SeaWorld Entertainment, Inc. (NYSE: SEAS)
The Orlando, FL-based company is an entertainment and theme park company. Over the past year, shares of this $5.5-billion company have increased 40.7%.
In the fourth quarter of 2021, the company reported earnings, as compared to a loss in the year-ago quarter. Its revenues expanded 140.7% year-over-year.
In 2022, the company anticipates benefiting from new rides, events, and attractions. The company’s CEO, Marc Swanson, said, “…we believe our forward ride, attraction and park enhancement investment plans are the most robust they have ever been, and currently reflect the cadence, focus areas and strategies we have been working towards.”
Last month, Chris Woronka, an analyst at Deutsche Bank, maintained a Buy rating on SeaWorld while increasing the price target to $83 (14.77% upside potential) from $74. The analyst said, “…a possible preference for domestic leisure options in light of geopolitical events could boost park visitation levels above currently anticipated levels.”
The company’s Strong Buy consensus rating is based on six Buys and two Holds. SeaWorld’s average price target of $78.86 suggests upside potential of 9.04%. The company scores a ‘Perfect 10’ on TipRanks.
Conclusion
Companies providing leisure and hospitality services are well-positioned to benefit as the demand is all set to overcome the Covid-19 impact. The aforementioned service providers have a strong foothold in their respective fields and offer immense growth potential in the quarters ahead.
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