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The market for food and eating out has been changing rapidly over the last few years. With the explosion in popularity of fast casual restaurants like Chipotle (CMG - Free Report) , it became clear to investors that restaurants can be powerful companies.
While the stocks below aren’t fast-casual style restaurants, they are strong brands, with growing sales and earnings. Furthermore, they are Zacks Rank #1 (Strong Buy) stocks, meaning analysts have recently revised their earnings higher. With improved earnings expectations it is much more likely for these stocks to rally in the near term.
Bloomin’ Brands
Bloomin' Brands (BLMN - Free Report) , is a casual dining restaurant company with a portfolio of differentiated restaurant. It 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 US and internationally.
Bloomin’ Brands is a Zacks Rank #1 (Strong Buy) stock, indicating upward trending earnings revisions. BLMN has had its earnings upgraded across all future reporting periods, with the next quarter earnings revised 15% higher over the last 60 days.
Sales for the current quarter are expected to grow 6% YoY to $1.2 billion, while earnings are projected to grow 8.8% YoY to $0.87 per share. Current year sales are expected to grow 7% to $4.7 billion, and earnings are expected to climb 16.3% YoY to $2.93 per share.
Image Source: Zacks Investment Research
BLMN stock has had flattish returns over the last five years, which is reflected in its stagnant sales growth over the same period. Fortunately, things seem to be improving and sales growth is accelerating higher.
Additionally, even though there hasn't been much appreciation in the stock price, BLMN spits off a hefty dividend yield. The current dividend yield is 3.9%, and has increased 71% over the last year, and has been increased by an average of 24% annually over the last three years.
Image Source: Zacks Investment Research
Bloomin’ Brands is trading at a one-year forward earnings multiple of 8x, which is below its five-year median of 10x, and well below the industry average 26x.
Image Source: Zacks Investment Research
Kura Sushi USA
Kura Sushi (KRUS - Free Report) is a technology-enabled Japanese restaurant based in the U.S. KRUS provides Japanese cuisine through an engaging revolving sushi service model and currently operates 33 restaurants in nine states.
Kura Sushi reported Q2 earnings on Wednesday, April 5. Although the stock was down after the report, KRUS showed a strong quarter of sales and earnings growth. Revenue of $44 million beat expectations by 5% and earnings of -$0.10 beat expectations of -$0.20. Kura Sushi is on an earnings report winning streak and has surpassed expectations three of the last four reporting periods
KRUS stock has put on a stellar performance over the last three years, rallying 440% over the period. This is considerably better than the industry average of 61% and the market average of 63% over the same period.
Image Source: Zacks Investment Research
This stock appreciation reflects the huge growth in sales the company has experienced since its IPO. Revolving sushi service is a novel and fun way for diners to enjoy a meal and the restaurant has exploded in popularity. Sales have more than tripled since 2020, growing from $45 million to $163 million annually.
Image Source: Zacks Investment Research
An exciting development for KRUS is that analysts have raised expectations for next year’s earnings to show its first full year with positive earnings. This upgrade has given Kura Sushi a Zacks Rank #1 (Strong Buy) status. Next year earnings are expected to be $0.20 per share, a 192% YoY increase.
KRUS is trading at a one-year forward sales multiple of 3x, which is in line with the industry average and below its three-year median of 4x. I think this valuation shows what a compelling opportunity KRUS is. Its valuation is in line with the industry average, yet sales growth is well above average, with 2022 showing a 117% increase in sales YoY.
Image Source: Zacks Investment Research
Conclusion
The Zacks Rank is an extremely useful way to find compelling stock picks, with strong near-term expectations. Even stocks that show negative earnings, which can be easy for new investors to steer clear from, can be great picks as is evident here.
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2 Top Ranked Restaurant Stocks to Buy Now
The market for food and eating out has been changing rapidly over the last few years. With the explosion in popularity of fast casual restaurants like Chipotle (CMG - Free Report) , it became clear to investors that restaurants can be powerful companies.
While the stocks below aren’t fast-casual style restaurants, they are strong brands, with growing sales and earnings. Furthermore, they are Zacks Rank #1 (Strong Buy) stocks, meaning analysts have recently revised their earnings higher. With improved earnings expectations it is much more likely for these stocks to rally in the near term.
Bloomin’ Brands
Bloomin' Brands (BLMN - Free Report) , is a casual dining restaurant company with a portfolio of differentiated restaurant. It 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 US and internationally.
Bloomin’ Brands is a Zacks Rank #1 (Strong Buy) stock, indicating upward trending earnings revisions. BLMN has had its earnings upgraded across all future reporting periods, with the next quarter earnings revised 15% higher over the last 60 days.
Sales for the current quarter are expected to grow 6% YoY to $1.2 billion, while earnings are projected to grow 8.8% YoY to $0.87 per share. Current year sales are expected to grow 7% to $4.7 billion, and earnings are expected to climb 16.3% YoY to $2.93 per share.
Image Source: Zacks Investment Research
BLMN stock has had flattish returns over the last five years, which is reflected in its stagnant sales growth over the same period. Fortunately, things seem to be improving and sales growth is accelerating higher.
Additionally, even though there hasn't been much appreciation in the stock price, BLMN spits off a hefty dividend yield. The current dividend yield is 3.9%, and has increased 71% over the last year, and has been increased by an average of 24% annually over the last three years.
Image Source: Zacks Investment Research
Bloomin’ Brands is trading at a one-year forward earnings multiple of 8x, which is below its five-year median of 10x, and well below the industry average 26x.
Image Source: Zacks Investment Research
Kura Sushi USA
Kura Sushi (KRUS - Free Report) is a technology-enabled Japanese restaurant based in the U.S. KRUS provides Japanese cuisine through an engaging revolving sushi service model and currently operates 33 restaurants in nine states.
Kura Sushi reported Q2 earnings on Wednesday, April 5. Although the stock was down after the report, KRUS showed a strong quarter of sales and earnings growth. Revenue of $44 million beat expectations by 5% and earnings of -$0.10 beat expectations of -$0.20. Kura Sushi is on an earnings report winning streak and has surpassed expectations three of the last four reporting periods
KRUS stock has put on a stellar performance over the last three years, rallying 440% over the period. This is considerably better than the industry average of 61% and the market average of 63% over the same period.
Image Source: Zacks Investment Research
This stock appreciation reflects the huge growth in sales the company has experienced since its IPO. Revolving sushi service is a novel and fun way for diners to enjoy a meal and the restaurant has exploded in popularity. Sales have more than tripled since 2020, growing from $45 million to $163 million annually.
Image Source: Zacks Investment Research
An exciting development for KRUS is that analysts have raised expectations for next year’s earnings to show its first full year with positive earnings. This upgrade has given Kura Sushi a Zacks Rank #1 (Strong Buy) status. Next year earnings are expected to be $0.20 per share, a 192% YoY increase.
KRUS is trading at a one-year forward sales multiple of 3x, which is in line with the industry average and below its three-year median of 4x. I think this valuation shows what a compelling opportunity KRUS is. Its valuation is in line with the industry average, yet sales growth is well above average, with 2022 showing a 117% increase in sales YoY.
Image Source: Zacks Investment Research
Conclusion
The Zacks Rank is an extremely useful way to find compelling stock picks, with strong near-term expectations. Even stocks that show negative earnings, which can be easy for new investors to steer clear from, can be great picks as is evident here.