Top Stocks to Watch After May's Optimistic CPI Data

May's CPI data came in better than expected, with the CPI increasing 0.1% MoM and 2.4% YoY, below forecasts. The article highlights Carvana (CVNA), Sprouts Farmers Market (SFM), and Urban Outfitters (URBN) as retail stocks with strong buy ratings, noting positive earnings estimate revisions and growth prospects; additionally, consumer lending stocks LendingTree (TREE) and OneMain Holdings (OMF) are identified as potentially appealing, with OMF offering a 7% dividend yield.

Analysis

May's Consumer Price Index (CPI) data indicated a moderation in inflationary pressures, with headline CPI rising 0.1% month-over-month and 2.4% year-over-year, both below economists' consensus estimates of 0.2% and 2.5% respectively. Similarly, Core CPI, excluding volatile food and energy, increased 0.1% monthly against a 0.3% forecast, and 2.8% annually, below the 2.9% expectation; this annual Core CPI reading matched April's ascent. This disinflationary signal, occurring amidst ongoing concerns over potential tariff impacts on costs, sets a positive backdrop for specific retail equities. Carvana (CVNA) is highlighted for its e-commerce platform's stock appreciation of nearly +3,000% since its 2017 IPO and recent soaring EPS estimates for fiscal 2025 and 2026, driven by cost-cutting initiatives, with the stock currently 9% below its all-time high. Sprouts Farmers Market (SFM) has demonstrated strong performance, with its shares up over +600% since Carvana went public, capitalizing on health-conscious consumer trends; its FY25 and FY26 EPS estimates have risen 9% and 7% respectively in the last 60 days. Urban Outfitters (URBN) achieved record quarterly sales of $1.3 billion in Q1, with its Nuuly clothing and resale business growing 60% and adding 110,000 subscribers, and benefits from over 70% institutional ownership; the company is projecting $6 billion in annual sales and has seen a very positive trend in earnings estimate revisions. All three (CVNA, SFM, URBN) currently hold a Zacks Rank #1 (Strong Buy). Additionally, consumer lending stocks LendingTree (TREE) and OneMain Holdings (OMF), both Zacks Rank #3 (Hold), experienced a rise of over 2% following the CPI report, with OMF noted for its appealing growth trajectory and an annual dividend yield exceeding 7%.

Key Decisions for Investors

• Investors may consider evaluating Carvana, Sprouts Farmers Market, and Urban Outfitters, all carrying a Zacks Rank #1 (Strong Buy), given their robust growth narratives, significant upward EPS estimate revisions, and strong operational performance including CVNA's cost efficiencies, SFM's market positioning, and URBN's record sales and Nuuly expansion.
• For portfolios with an income focus, OneMain Holdings warrants attention due to its over 7% dividend yield and stated appealing growth trajectory, alongside LendingTree, as both consumer lending stocks reacted positively to the favorable CPI data, though their Zacks Rank #3 (Hold) suggests ongoing monitoring.
• It is prudent to remain aware of potential headwinds from tariffs which could impact consumer costs, and to continue tracking inflation data to ascertain if May's optimistic CPI figures signal a sustained trend.