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4 Restaurant Stocks to Buy on Continued Rise in Sales
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Rising prices have been taking a toll on the retail sector, with sales are slowing almost every month. However, sales at U.S. bars and restaurants have been steadily rising. People are spending aggressively on eating out despite the soaring prices of dishes. This, at the same time, proves that people have once again started spending more on services and less on goods.
The restaurant industry suffered during the peak of the pandemic but is now steadily trying to bounce back. Moreover, the industry is also making solid job additions over the past several months to meet customer demand.
Given this scenario, stocks like Chipotle Mexican Grill, Inc. (CMG - Free Report) , Arcos Dorados Holdings Inc. (ARCO - Free Report) ,The ONE Group Hospitality, Inc. (STKS - Free Report) and Potbelly Corporation (PBPB - Free Report) are likely to benefit in the near term.
Restaurant Sales Grow
Sales at American restaurants and bars increased 0.5% in September as more people continued to spend on eating out. The jump comes despite higher prices for dishes and raw materials. September’s jump follows a 1.1% rise in August.
Moreover, the rise in restaurant sales came even as retail sales remained unchanged in September after a meager 0.3% growth in August.
The steady rise in sales at bars and restaurants doesn’t come as a surprise as people have been dining out more frequently ever since the economy reopened following the COVID-induced lockdowns.
Following the coronavirus outbreak, the restaurant industry suffered the most in March and April 2020. Sales started to rebound after that but the recovery was shaky because COVID-related restrictions were still in place and many people were hesitant to socialize confidently.
The sector finally started showing signs of a recovery this year, with sales reaching their pre-pandemic levels and projected to rise in the months ahead.
Moreover, during normal times, consumers spend more on services than on goods. At the height of the pandemic, however, the pattern changed, with people spending on commodities instead of services since they didn't have many other options.
The situation has nearly returned to normal, and things have once again changed. Bars and restaurants is the only service industry that is part of the retail sales report. This is yet another factor contributing to the fact that restaurant sales have increased significantly compared to other sectors, including overall retail sales.
Industry Facing Challenges
Restaurant operators are making an effort to fight back against ongoing challenges, with rising costs becoming a serious threat to sales growth. Restaurant owners’ emphasis on digital innovation, efforts to increase sales, and cost-cutting initiatives have been the key drivers of this year's rebound.
Given the growing importance of the Internet, digital innovation is now crucial. Large restaurant chains regularly use delivery services and Internet platforms to enhance sales, which has been boosting revenues.
Also, the industry has been making significant job additions. The National Restaurant Association (NRA) said that restaurants and bars made solid job additions in September despite a slowdown in overall job growth. U.S. bars and restaurants added 60,000 jobs in September, according to the latest data from the Labor Department. This was up from 27,500 jobs added in August.
The overall job additions to the U.S. economy in September were 263,000.
Chipotle Mexican Grill, Inc., together with its subsidiaries, operates quick-casual and fresh Mexican food restaurant chains. CMG offers a focused menu of burritos, tacos, burrito bowls (a burrito without the tortilla) and salads.
Chipotle Mexican Grill’s expected earnings growth rate for the current year is 28.1%. The Zacks Consensus Estimate for current-year earnings has improved more than 2.9% over the past 90 days.
Arcos Dorados Holdings Inc. operates as a franchisee of McDonald's, with its operations divided in Brazil; North Latin America division; South Latin America and the Caribbean division. ARCO also runs quick-service restaurants in Latin America and the Caribbean.
Arcos Dorados’ expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 11.4% over the past 90 days.
The ONE Group Hospitality, Inc. develops, manages and operates a portfolio of high-energy restaurants, lounges and bars. STKS also provides food and beverage hospitality solutions. The ONE Group Hospitality’s primary restaurant brand is STK, which is a steakhouse concept with locations in metropolitan cities throughout the United States and in London.
The ONE Group Hospitality’s expected earnings growth rate for the current year is 13.6%. The Zacks Consensus Estimate for current-year earnings has improved 1.5% over the past 60 days.
Potbelly Corporation is a neighborhood sandwich concept. PBPB manages establishments for consuming food on premises to offer sandwiches, salads, soups, chili, chips, cookies, ice cream, and smoothies. Potbelly Corporation serves customers throughout the United States.
Potbelly Corporation’s expected earnings growth rate for the current year is 100%. The Zacks Consensus Estimate for current-year earnings has improved more than 100% over the past 90 days.
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4 Restaurant Stocks to Buy on Continued Rise in Sales
Rising prices have been taking a toll on the retail sector, with sales are slowing almost every month. However, sales at U.S. bars and restaurants have been steadily rising. People are spending aggressively on eating out despite the soaring prices of dishes. This, at the same time, proves that people have once again started spending more on services and less on goods.
The restaurant industry suffered during the peak of the pandemic but is now steadily trying to bounce back. Moreover, the industry is also making solid job additions over the past several months to meet customer demand.
Given this scenario, stocks like Chipotle Mexican Grill, Inc. (CMG - Free Report) , Arcos Dorados Holdings Inc. (ARCO - Free Report) ,The ONE Group Hospitality, Inc. (STKS - Free Report) and Potbelly Corporation (PBPB - Free Report) are likely to benefit in the near term.
Restaurant Sales Grow
Sales at American restaurants and bars increased 0.5% in September as more people continued to spend on eating out. The jump comes despite higher prices for dishes and raw materials. September’s jump follows a 1.1% rise in August.
Moreover, the rise in restaurant sales came even as retail sales remained unchanged in September after a meager 0.3% growth in August.
The steady rise in sales at bars and restaurants doesn’t come as a surprise as people have been dining out more frequently ever since the economy reopened following the COVID-induced lockdowns.
Following the coronavirus outbreak, the restaurant industry suffered the most in March and April 2020. Sales started to rebound after that but the recovery was shaky because COVID-related restrictions were still in place and many people were hesitant to socialize confidently.
The sector finally started showing signs of a recovery this year, with sales reaching their pre-pandemic levels and projected to rise in the months ahead.
Moreover, during normal times, consumers spend more on services than on goods. At the height of the pandemic, however, the pattern changed, with people spending on commodities instead of services since they didn't have many other options.
The situation has nearly returned to normal, and things have once again changed. Bars and restaurants is the only service industry that is part of the retail sales report. This is yet another factor contributing to the fact that restaurant sales have increased significantly compared to other sectors, including overall retail sales.
Industry Facing Challenges
Restaurant operators are making an effort to fight back against ongoing challenges, with rising costs becoming a serious threat to sales growth. Restaurant owners’ emphasis on digital innovation, efforts to increase sales, and cost-cutting initiatives have been the key drivers of this year's rebound.
Given the growing importance of the Internet, digital innovation is now crucial. Large restaurant chains regularly use delivery services and Internet platforms to enhance sales, which has been boosting revenues.
Also, the industry has been making significant job additions. The National Restaurant Association (NRA) said that restaurants and bars made solid job additions in September despite a slowdown in overall job growth. U.S. bars and restaurants added 60,000 jobs in September, according to the latest data from the Labor Department. This was up from 27,500 jobs added in August.
The overall job additions to the U.S. economy in September were 263,000.
Our Choices
Given this situation, it would be ideal to invest in these four restaurant stocks. Each of these stocks currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Chipotle Mexican Grill, Inc., together with its subsidiaries, operates quick-casual and fresh Mexican food restaurant chains. CMG offers a focused menu of burritos, tacos, burrito bowls (a burrito without the tortilla) and salads.
Chipotle Mexican Grill’s expected earnings growth rate for the current year is 28.1%. The Zacks Consensus Estimate for current-year earnings has improved more than 2.9% over the past 90 days.
Arcos Dorados Holdings Inc. operates as a franchisee of McDonald's, with its operations divided in Brazil; North Latin America division; South Latin America and the Caribbean division. ARCO also runs quick-service restaurants in Latin America and the Caribbean.
Arcos Dorados’ expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 11.4% over the past 90 days.
The ONE Group Hospitality, Inc. develops, manages and operates a portfolio of high-energy restaurants, lounges and bars. STKS also provides food and beverage hospitality solutions. The ONE Group Hospitality’s primary restaurant brand is STK, which is a steakhouse concept with locations in metropolitan cities throughout the United States and in London.
The ONE Group Hospitality’s expected earnings growth rate for the current year is 13.6%. The Zacks Consensus Estimate for current-year earnings has improved 1.5% over the past 60 days.
Potbelly Corporation is a neighborhood sandwich concept. PBPB manages establishments for consuming food on premises to offer sandwiches, salads, soups, chili, chips, cookies, ice cream, and smoothies. Potbelly Corporation serves customers throughout the United States.
Potbelly Corporation’s expected earnings growth rate for the current year is 100%. The Zacks Consensus Estimate for current-year earnings has improved more than 100% over the past 90 days.