Yahoo Finance 5 Solid Restaurant Stocks to Buy as March Sales Rise
The restaurant industry has stood its ground and performed quite well amid price pressures. After a solid 2023, sales this year, too, have been steadily on the rise.
Sales at U.S. food and drinking places totaled $98.1 billion in March, increasing 0.4% month over month after rising 0.5% in February. Year over year, sales at restaurants increased 6.6%. Sales from January through March totaled $27.1 billion.
The retail sector went through a difficult phase as sales slowed owing to higher prices and borrowing rates. Retail sales grew 0.7% in March. The Federal Reserve adopted an aggressive monetary tightening campaign to curb inflation that saw interest rates soaring from 0-25% to 5.25-5.5% since March 2022.
However, consumers continued to spend lavishly at restaurants despite price pressures. Restaurant sales have been driving overall retail sales for quite some time.
The steady increase in restaurant sales, as indicated in the retail sales report, reflects a changing trend in consumer expenditure toward services rather than goods.
Also, the upward trajectory in restaurant sales is propelled by strong consumer spending and an uptick in personal income. Consumer spending surged by $145.5 billion in February, a 0.8% increase from the previous month, while personal income jumped by $66.5 billion, up 0.3% from the previous month.
According to the National Restaurant Association's annual State of the Industry Report, restaurant sales are projected to reach a record $1.1 trillion in 2024. This projection, a 10.3% jump from the initial sales forecast for 2023, would push total industry revenues past the trillion-dollar milestone for the first time.
Our Choices
Given this scenario, it would be prudent to invest in restaurant stocks. We have narrowed down our search to five stocks, namely Brinker International, Inc. EAT, Portillo's Inc. PTLO, CAVA Group, Inc. CAVA, Yum China Holdings, Inc. YUMC and Wingstop Inc. WING.
These stocks have seen positive earnings estimate revisions in the last 60 days. Each of our picks carries a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Brinker International, Inc. primarily owns, operates, develops and franchises various restaurants under the Chili’s Grill & Bar and Maggiano’s Little Italy brands. EAT took over Chili’s, Inc., a Texas corporation, in September 1983 and completed the acquisition of Maggiano’s in August 1995. Chili’s is a preeminent leader in the bar & grill category of casual dining. The brand has been functioning for over the last 40 years.
Brinker International’s expected earnings growth rate for the current year is 31.1%. The Zacks Consensus Estimate for current-year earnings has improved 0.5% over the past 60 days. EAT currently carries 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 8.1%. The Zacks Consensus Estimate for current-year earnings has improved 2.6% over the past 60 days. PTLO currently sports a Zacks Rank #1.
CAVA Group, Inc. is a category-defining Mediterranean fast-casual restaurant brand, which brings heart, health and humanity to food. CAVA is based in Washington.
CAVA Group’s expected earnings growth rate for the current year is 19.1%. The Zacks Consensus Estimate for current-year earnings has improved 66.7% over the past 60 days. CAVA currently has a Zacks Rank #2.
Yum China Holdings, Inc. operates both company-owned and franchised restaurants. YUMC’s brands include The KFC, Pizza Hut and Taco Bell. The company also owns East Dawning, Little Sheep, and COFFii & JOY.
Yum China Holdings’ expected earnings growth rate for the current year is 9.5%. The Zacks Consensus Estimate for current-year earnings has improved 2.3% over the past 90 days. YUMC currently has a Zacks Rank #2.
Wingstop Inc. franchises and operates restaurants. WING’s operates through the Franchise segment and the Company segment. Wingstop offers cooked-to-order, hand-sauced and tossed chicken wings.
Wingstop’sexpected earnings growth rate for the current year is 21%. The Zacks Consensus Estimate for current-year earnings has improved 4.1% over the past 60 days. WING currently carries a Zacks Rank #2.
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Brinker International, Inc. (EAT) : Free Stock Analysis Report
Wingstop Inc. (WING) : Free Stock Analysis Report
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Portillo's Inc. (PTLO) : Free Stock Analysis Report
CAVA Group, Inc. (CAVA) : Free Stock Analysis Report
