Yahoo Finance 4 Restaurant Stocks to Buy Amid Ongoing Price Challenges
The retail sector has been putting up a great fight against rising prices. Soaring inflation has seen almost every sector in the economy suffer. However, the restaurant industry is still growing steadily as people continue to eat outside their homes.
Higher sales at restaurants are also making owners hire more workers at an aggressive pace. Given this situation, stocks like Bloomin' Brands, Inc. BLMN, Chuy's Holdings, Inc. CHUY, Darden Restaurants, Inc. DRI and Portillo's Inc. PTLO are likely to benefit in the near term.
Restaurant Sales Going Strong
According to the U.S. Census Bureau, sales at eating and drinking places in the United States totaled $92.7 billion in February. Although sales came in a shade lower than in January, U.S. restaurants have been putting up a great show amid the ongoing price challenges.
However, sales were nearly $3 billion higher than the $89.8 billion recorded in December. The report also mentioned that the seasonally adjusted sales readings for January and February were significantly higher than the 2022 trendline.
The restaurant industry had a solid 2022, and this year, too, has so far been impressive. According to the report, total revenues at restaurants and bars increased by more than 19% in January and February compared to the same period in 2022.
Price pressures have severely restricted personal spending for more than a year now. Yet, the restaurant sector has managed to put on a spectacular performance, with revenues rising almost every month.
The industry has been working to recover from the pandemic lows since the beginning of 2022. With the COVID-19 epidemic and subsequent reemergence of mutant variations, which made individuals less likely to socialize, sales were hindered in 2020 and 2021.
This had a negative impact on the restaurant business. However, the recovery only began after the COVID-induced lockdown was lifted and the economy was once again open.
Also, people usually tend to spend more on services than on goods. This altered during the pandemic, with customers spending more on commodities than services as they had fewer options.
Things have finally returned to normal, and consumers have started spending more on services. Restaurants is the only service category included in retail sales data.
Impressive sales have also prompted restaurant owners to hire more workers. The U.S. labor market has been resilient over the past year and the leisure and hospitality sector has been topping the list among recruiters.
Of the 311,000 nonfarm payrolls that increased in February, 105,000, were in the leisure and hospitality sector.
Also, restaurant owners are working hard to overcome the ongoing challenges, particularly the rising costs. Restaurants are heavily focusing on digital innovation, trying to boost sales, and implementing cost-cutting measures into place, which is aiding the industry's recovery.
Digital innovation is now a crucial component in driving sales owing to the Internet's increasing prominence. Delivery services and online platforms are being extensively used by large restaurant chains, which has been boosting sales.
Our Choices
Given this situation, it would be ideal to invest in these four restaurant stocks.
Bloomin' Brands, Inc. is a casual dining restaurant company with a portfolio of differentiated restaurant concepts. BLMN has five concepts: Outback Steakhouse, Carrabba's Italian Grill, Bonefish Grill, Fleming's Prime Steakhouse and Wine Bar and Roy's. Bloomin' Brands offers its products and services through company-owned and franchised locations throughout the United States and internationally.
Bloomin' Brands’ expected earnings growth rate for the current year is 16.3%. The Zacks Consensus Estimate for current-year earnings has improved 9.7% over the past 60 days. Currently, BLMN sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Chuy's Holdings, Inc. owns and operates full-service restaurants serving a distinct menu of authentic Mexican food. CHUY offers a menu, which includes appetizers, soups and salads, tacos, burritos, enchiladas, fajitas and combination platters. Chuy's Holdings operates chains throughout Texas, Alabama, Indiana, Kentucky and Tennessee.
Chuy's Holdings’ expected earnings growth rate for the current year is 19%. The Zacks Consensus Estimate for current-year earnings has improved 13.2% over the past 60 days. CHUY currently has a Zacks Rank #2 (Buy).
Darden Restaurants, Inc. is one of the largest casual dining restaurant operators worldwide. DRI has operations in the United States and Canada with more than 1,700 restaurants.
Darden Restaurants’ expected earnings growth rate for the current year is 6.9%. The Zacks Consensus Estimate for current-year earnings has improved 1% over the past 90 days. DRI currently has a Zacks Rank #2.
Portillo's Inc. provides a fast-casual restaurant concept known for its menu of Chicago-style favorites. PTLO is based in Chicago.
Portillo's expected earnings growth rate for the current year is 24%. The Zacks Consensus Estimate for current-year earnings has improved 29.2% over the past 90 days. PTLO currently has a Zacks Rank #2.
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Darden Restaurants, Inc. (DRI) : Free Stock Analysis Report
Bloomin' Brands, Inc. (BLMN) : Free Stock Analysis Report
Chuy's Holdings, Inc. (CHUY) : Free Stock Analysis Report
Portillo's Inc. (PTLO) : Free Stock Analysis Report
