Unless you live in a vacuum, it’s an easy guess that one of the fastest growing ethnic demographics in the United States is Hispanic. In fact, Hispanic individuals make up about 18% of the U.S. population, so they are an extremely important consumer group for American companies. In fact, they are such a dynamic and growing part of the population that there are 18 metropolitan statistical areas (MSAs) where they make up 50% or more of the population.
In a recent research report, Jefferies notes that numerous companies reported weaker Hispanic spending when reporting second-quarter results. The analysts suggest that the macro economic backdrop is likely not the cause, but the cloud around immigration policy could be. While policy may be subject to some change, they feel spending is set to rebound, and they focus on six companies that could be the big beneficiaries.
Here are the six companies that could good a boost from renewed Hispanic spending this fall and into the busy holiday selling season. All are rated Buy at Jefferies.
This company had a hot initial public offering last year and has come back big-time for investors looking to add shares. ELF Beauty Inc. (NYSE: ELF) offers products for eyes, lips and face to consumers through its retail customers and its stores and e-commerce channels. The company offers a range of products for eyes, such as eye shadow, eyeliner, mascara and eyelashes, as well as eyebrows, concealer and primer, brushes and tools, and sets and palettes.
The company sells its products in national and international retailers (with international primarily serviced by distributors) and direct-to-consumer channels. It sells its products in retail stores in the United States across mass, drug store, food and specialty retail channels. The analysts estimate that 24% of the company’s consumers are Hispanic.
The Jefferies price target for the shares is $30, while the Wall Street consensus target is $31.22. The stock traded at $19.80 Wednesday morning.
Jack in the Box
This company is a top fast-food offering for traders and investors to consider. Jack in the Box Inc. (NASDAQ: JACK) operates and franchises Jack in the Box restaurants, one of the nation’s largest hamburger chains, with more than 2,200 restaurants in 21 states and Guam. Additionally, through a wholly owned subsidiary, the company operates and franchises Qdoba Mexican Eats, a leader in fast-casual dining, with more than 600 restaurants in 47 states, the District of Columbia and Canada.
Jack in the Box is a favorite for Hispanic diners, and the analysts noted this in the report:
The company saw a 4% decline in overall traffic in the June quarter, and 53% of the stores are in MSAs with 25% or more Hispanic mix. Jack in the Box has likely already been pressured by this Hispanic exposure; The analyst believes some recently elevated costs are temporary, and notes same-store-sales improvement at the company.
Shareholders receive a 1.65% dividend. Jefferies has a $120 price objective, and the consensus target is $111.93. Shares were last seen trading at $96.90.