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5 Restaurant Stocks to Boost Your Portfolio on Soaring Sales
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The U.S. restaurant industry held its ground in 2023 amid a massive headwind in the form of inflationary pressure. Although consumers spent cautiously and cut down on expenses owing to the high borrowing rates, they spent lavishly on eating out.
This saw the restaurant industry driving overall retail sales. The holiday season also has so far proved good for the restaurant industry. Sales as U.S. restaurants totaled $94.7 billion in November, jumping 2% month over month, the Commerce Department reported.
On a year-over-year basis, sales at food and drinking places soared 11% in November. The Federal Reserve increased interest rates by 525 basis points since March 2022 in its bid to curb multi-decade high inflation.
Higher interest posed a threat to the economy as demand for goods and services slowed, with the retail sector taking a major hit. However, spending at restaurants soared despite that. Sales growth at restaurants, bars, and similar establishments surpassed the rate of price increases during the inflation crisis.
Sales at food services and drinking places have soared 38% since February 2020, a month before the pandemic struck.
Expectations are high that the restaurant industry will continue to flourish in 2024 as the Federal Reserve is finally planning to end its monetary tightening campaign. The Fed left interest rates unchanged in its current range of 5.25-5.50% in the last three meetings.
Also, the minutes of the Fed’s December FOMC meeting indicate that rate cuts are on the anvil. Expectations are high that the Fed would go for at least three rate cuts this year. Lower interest rates bode well for the economy, including the restaurant industry, as price pressures will ease.
Our Picks
Given this situation, it would be wise to invest in these five restaurant stocks that have strong potential for 2024. 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).
Brinker International, Inc. (EAT - Free Report) 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 26.2%. The Zacks Consensus Estimate for current-year earnings has improved 1.4% over the past 60 days. EAT currently carries a Zacks Rank #2.
Arcos Dorados Holdings Inc. (ARCO - Free Report) operates as a franchisee of McDonald's, with its operations divided into Brazil, the 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 18.8%. The Zacks Consensus Estimate for current-year earnings has improved 9.3% over the past 60 days. Currently, ARCO has a Zacks Rank #2.
Wingstop Inc. (WING - Free Report) franchises and operates restaurants. WING’s operating segments are, namely, Franchise and Company. Wingstop offers cooked-to-order, hand-sauced and tossed chicken wings.
Wingstop’sexpected earnings growth rate for the current year is 18.3%. The Zacks Consensus Estimate for current-year earnings has improved 0.4% over the past 60 days. WING currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Yum China Holdings, Inc. (YUMC - Free Report) 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 17.7%. The Zacks Consensus Estimate for current-year earnings has improved 0.4% over the past 60 days. YUMC currently has a Zacks Rank #2.
Carrols Restaurant Group, Inc. is the largest BURGER KING franchisee in the United States, with over 800 restaurants, and has operated BURGER KING restaurants since 1976.
Carrols Restaurant Group’s expected earnings growth rate for the current year is 168.6%. The Zacks Consensus Estimate for current-year earnings has improved 29.7% over the past 60 days. TAST presently sports a Zacks Rank #1.
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5 Restaurant Stocks to Boost Your Portfolio on Soaring Sales
The U.S. restaurant industry held its ground in 2023 amid a massive headwind in the form of inflationary pressure. Although consumers spent cautiously and cut down on expenses owing to the high borrowing rates, they spent lavishly on eating out.
This saw the restaurant industry driving overall retail sales. The holiday season also has so far proved good for the restaurant industry. Sales as U.S. restaurants totaled $94.7 billion in November, jumping 2% month over month, the Commerce Department reported.
On a year-over-year basis, sales at food and drinking places soared 11% in November. The Federal Reserve increased interest rates by 525 basis points since March 2022 in its bid to curb multi-decade high inflation.
Higher interest posed a threat to the economy as demand for goods and services slowed, with the retail sector taking a major hit. However, spending at restaurants soared despite that. Sales growth at restaurants, bars, and similar establishments surpassed the rate of price increases during the inflation crisis.
Sales at food services and drinking places have soared 38% since February 2020, a month before the pandemic struck.
Expectations are high that the restaurant industry will continue to flourish in 2024 as the Federal Reserve is finally planning to end its monetary tightening campaign. The Fed left interest rates unchanged in its current range of 5.25-5.50% in the last three meetings.
Also, the minutes of the Fed’s December FOMC meeting indicate that rate cuts are on the anvil. Expectations are high that the Fed would go for at least three rate cuts this year. Lower interest rates bode well for the economy, including the restaurant industry, as price pressures will ease.
Our Picks
Given this situation, it would be wise to invest in these five restaurant stocks that have strong potential for 2024. 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).
Brinker International, Inc. (EAT - Free Report) 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 26.2%. The Zacks Consensus Estimate for current-year earnings has improved 1.4% over the past 60 days. EAT currently carries a Zacks Rank #2.
Arcos Dorados Holdings Inc. (ARCO - Free Report) operates as a franchisee of McDonald's, with its operations divided into Brazil, the 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 18.8%. The Zacks Consensus Estimate for current-year earnings has improved 9.3% over the past 60 days. Currently, ARCO has a Zacks Rank #2.
Wingstop Inc. (WING - Free Report) franchises and operates restaurants. WING’s operating segments are, namely, Franchise and Company. Wingstop offers cooked-to-order, hand-sauced and tossed chicken wings.
Wingstop’sexpected earnings growth rate for the current year is 18.3%. The Zacks Consensus Estimate for current-year earnings has improved 0.4% over the past 60 days. WING currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Yum China Holdings, Inc. (YUMC - Free Report) 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 17.7%. The Zacks Consensus Estimate for current-year earnings has improved 0.4% over the past 60 days. YUMC currently has a Zacks Rank #2.
Carrols Restaurant Group, Inc. is the largest BURGER KING franchisee in the United States, with over 800 restaurants, and has operated BURGER KING restaurants since 1976.
Carrols Restaurant Group’s expected earnings growth rate for the current year is 168.6%. The Zacks Consensus Estimate for current-year earnings has improved 29.7% over the past 60 days. TAST presently sports a Zacks Rank #1.