Jhe Federal Reserve’s final monetary policy decision for 2021 is scheduled for this afternoon as the Fed wraps up its two-day policy meeting. The public will hear from central bank chairman Jerome Powell at a press conference scheduled for 2:30 p.m. ET.

Investors expect the Fed to accelerate the reduction of its bond buying program and lay the groundwork for several interest rate hikes next year. Powell has finally begun to acknowledge in recent weeks that current inflationary pressures may not be as “transient” as he initially portrayed, saying “inflation risks have intensified” as he prepares to to unwind the Fed’s bond purchases.

Even in the face of today’s November retail sales slump, Powell is likely to stick to the script as the economy has shown signs of resilience this year. The Commerce Department said consumers spent a record $638 million in stores and restaurants in October, up 21% from pre-pandemic levels. As many shoppers started receiving their holiday gifts earlier this year, a slight slowdown in sales growth in November makes sense.

While the most optimistic economists predict fourth quarter GDP of up to 8%, even a 6-7% growth rate allows Powell to begin the process of normalizing the business cycle and raising interest rates. In my opinion, this process should have started at this point and Powell now needs to catch up. Raising interest rates from these ultra-low levels should not be viewed as negative. Rather, it is a sign that the economy is back on solid footing and can sustain higher borrowing costs.

As borrowing costs rise, lenders are able to provide more loans at higher rates. An increase in lending and related services creates more revenue for these businesses. Historically, during periods of above-average inflation and periods of rising interest rates, financials have done relatively well.

The Zacks Financial Industry Group – Consumer Lending contains the three lenders we will discuss below and ranks in the top 39% of 253 industry groups. This industry is located in the finance sector, which is ranked in the top 13% of all Zacks sectors. Quantitative research suggests that about half of a stock’s return is due to its industry group. Targeting stocks in Zacks’ top-ranked sectors can dramatically improve your stock-picking success.

Mr. Cooper Group Inc. (COOPERATIVE)

Mr. Cooper Group provides fitting, quality, and transaction-based services primarily to single family residences in the United States. Based in Coppell, TX, COOP offers home lending services with a focus on providing lending products, services and technology.

COOP is trading at an attractive P/E of 4.76 and has outperformed the market this year with a return of 29%. The home lender has produced an average positive earnings surprise of 16.14% over the past four quarters. COOP recently reported EPS for the quarter ending September of $2.42, a surprise +22.84% from consensus.

Mr. Cooper Group (COOP) Price, Consensus and EPS Surprise

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What Zacks’ model reveals

The Zacks Earnings ESP (Expected Surprise Prediction) seeks to find companies that have recently experienced positive earnings estimate revision activity. The technique has proven to be very useful in finding positive profit surprises. In fact, combining a No. 3 or higher Zacks ranking with a positive earnings ESP, stocks produced a positive surprise 70% of the time according to our 10-year backtest.

Analysts covering the Mr Cooper Group have raised their annual earnings estimates by 3.77% over the past 60 days. COOP sports a Zacks Buy Rank #2 with a +11.91% Earnings ESP. Our model predicts an earnings beat for COOP for the current quarter.

Zacks’ current consensus estimate for annual revenue is $3.27 billion, a 19.78% increase over 2020. COOP’s next quarterly earnings announcement is scheduled for February 2. .^n/a, 2022.

Regional management company (RM)

Regional Management is a diversified consumer credit company and offers loan products primarily to customers with limited access to consumer credit from banks, credit card companies and other traditional lenders. Based in Greenville, SC, RM has operations in South Carolina, Texas, North Carolina, Tennessee and Alabama.

Trading at a very reasonable P/E of 6.61, the regional direction is Zacks #1 Strong Buy stock and has exceeded earnings estimates in each of the last five quarters. RM recently reported EPS of $2.11 in November, a surprise +34.39% from estimates. The company posted an average trailing four-quarter surprise of +47.46%, helping the stock climb more than 80% for the year.

Regional Management (RM), Consensus and EPS Surprise Awards

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RM’s revenue is expected to increase by 13.85% over last year. Analysts covering RM are in agreement in terms of earnings revisions and have raised their estimates for the full year by 9.21% in the past 60 days. The Zacks consensus estimate for current-year EPS now sits at $8.18. If RM is able to simply meet this expectation, it would translate to an incredible growth rate of 240.83% over 2020.

Global Acceptance Society (WRLD)

World Acceptance is a consumer finance company specializing in small, short-term loans, larger, medium-term loans, credit insurance and related consumer products and services. Also based in Greenville, SC, World Acceptance operates more than 1,200 branches in 16 US states.

WRLD stock has jumped nearly 130% this year, easily outpacing not only the market, but its industry group as well. WRLD has generated an average positive earnings surprise of 130.77% over the past four quarters, contributing to the stock’s incredible ascent.

Worldwide Acceptance Award (WRLD), EPS Consensus and Surprise

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Zacks’ current consensus estimate for annual revenue is $568.47 million, an increase of 8.17% over 2020. For next year, analysts expect sales increased by 4.44% to $593.69 million. WLRD is due to release its next earnings report on January 28^and.

All eyes will be on the Fed’s decision this afternoon. Investors will want to keep an eye on these three lenders that are showing significant outperformance.

5 shares ready to double

Each was handpicked by a Zacks expert as the #1 preferred stock to earn +100% or more in 2021. Previous recommendations have skyrocketed +143.0%, +175.9%, + 498.3% and +673.0%.

Most of the stocks in this report fly under the radar on Wall Street, which provides a great opportunity to get in on the ground floor.

Today, check out these 5 potential home runs >>

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.