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5 Restaurant Stocks to Add to Your Portfolio as July Sales Rebound
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The U.S. restaurant industry grew at a solid pace over the past two years, amid price pressures and higher wages and food costs. The growth has somewhat slowed this year but the industry has still made a solid effort to hold its ground.
Restaurant sales have climbed over the past few months, benefiting a large number of restaurant brands such as El Pollo Loco Holdings, Inc. (LOCO - Free Report) ,Meritage Hospitality Group Inc. (MHGU - Free Report) , Potbelly Corporation (PBPB - Free Report) , Texas Roadhouse, Inc. (TXRH - Free Report) and Wingstop (WING - Free Report) , which have seen positive earnings estimate revisions along with a favorable Zacks Rank.
Restaurant Sales Grow on Ebbing Price Pressures
The Commerce Department reported earlier this month that sales at U.S. bars and restaurants totaled $97.01 billion in July, up 0.4% from June’s total of $96.6 billion. Year over year, restaurant sales grew 3.4% in July.
Inflation has declined sharply and price pressures have eased over the past quarter. Consumers have lately been spending more freely as a result. This has seen sales rebounding over the past few months after a brief slowdown.
However, the industry still faces several challenges. The restaurant industry grew 3.3% in 2023, while it has grown 1.1% year to date. The broader market index, the S&P 500, has instead jumped 29.3% and 18.8%, respectively, over the same period.
Higher menu prices have been one of the major challenges to sales growth. Also, rising costs are hurting profit margins. Increased pre-opening expenses, higher marketing costs and expenditures related to sales-boosting efforts are putting pressure on restaurants’ margins.
However, restaurant owners are trying to overcome the hurdles by emphasizing digital innovation, sales-boosting strategies, and cost-saving measures. They frequently collaborate with delivery services and digital platforms to increase their sales.
The restaurant industry is likely to get a boost once the Fed starts its rate cuts, which will ease borrowing costs. This is likely to ease operating costs and widen profit margins.
5 Top Restaurant Stocks Promising Growth
We have narrowed our search to five restaurant stocks that have solid growth potential for the rest of 2024 and have seen positive earnings estimate revisions in the last 60 days. Each of our picks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
El Pollo Loco Holdings, Inc.
El Pollo Loco Holdings, Inc. through its subsidiary, develops, franchises, licenses and operates quick-service restaurants under the name El Pollo Loco. LOCO specializes in flame-grilled chicken in a variety of contemporary Mexican-influenced entrees, including specialty chicken burritos, chicken quesadillas, chicken tortilla soup, Pollo Bowls and Pollo Salads.
El Pollo Loco Holdings’ expected earnings growth rate for the current year is 12.7%. The Zacks Consensus Estimate for current-year earnings has improved 12.7% over the past 60 days. LOCO presently carries a Zacks Rank #2.
Image Source: Zacks Investment Research
Meritage Hospitality Group Inc.
Meritage Hospitality Group Inc. specializes in the development and operation of restaurants and leisure properties. MHGU owns and operates casual dining restaurants in Michigan, through brands consisting of Twisted Rooster locations, Crooked Goose location and Freighters Eatery & Taproom location.
Meritage Hospitality Group’s expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 44.3% over the past 60 days. MHGU currently sports a Zacks Rank #1.
Image Source: Zacks Investment Research
Potbelly Corporation
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’s expected earnings growth rate for the current year is 33.3%. The Zacks Consensus Estimate for current-year earnings has improved 11.1% over the past 60 days. PBPB currently carries a Zacks Rank #2.
Image Source: Zacks Investment Research
Texas Roadhouse, Inc.
Texas Roadhouse, Inc. is a full-service, casual dining restaurant chain, which offers assorted seasoned and aged steaks hand-cut daily on the premises and cooked to order over open gas-fired grills. TXRH operates restaurants under the Texas Roadhouse and Aspen Creek names.
Texas Roadhouse’s expected earnings growth rate for the current year is 39.2%. The Zacks Consensus Estimate for current-year earnings has improved 5% over the past 60 days. TXRH presently sports a Zacks Rank #1.
Image Source: Zacks Investment Research
Wingstop
Wingstop franchises and operates restaurants. WING’s operating segment consists of the Franchise and Company segments. WING offers classic wings, boneless wings and tenders that are cooked-to-order, and hand-sauced-and-tossed in various flavors.
Wingstop’s expected earnings growth rate for the current year is 51.2%. The Zacks Consensus Estimate for current-year earnings has improved 10.3% over the past 60 days. WING presently has a Zacks Rank #2.
Image Source: Zacks Investment Research
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5 Restaurant Stocks to Add to Your Portfolio as July Sales Rebound
The U.S. restaurant industry grew at a solid pace over the past two years, amid price pressures and higher wages and food costs. The growth has somewhat slowed this year but the industry has still made a solid effort to hold its ground.
Restaurant sales have climbed over the past few months, benefiting a large number of restaurant brands such as El Pollo Loco Holdings, Inc. (LOCO - Free Report) ,Meritage Hospitality Group Inc. (MHGU - Free Report) , Potbelly Corporation (PBPB - Free Report) , Texas Roadhouse, Inc. (TXRH - Free Report) and Wingstop (WING - Free Report) , which have seen positive earnings estimate revisions along with a favorable Zacks Rank.
Restaurant Sales Grow on Ebbing Price Pressures
The Commerce Department reported earlier this month that sales at U.S. bars and restaurants totaled $97.01 billion in July, up 0.4% from June’s total of $96.6 billion. Year over year, restaurant sales grew 3.4% in July.
Inflation has declined sharply and price pressures have eased over the past quarter. Consumers have lately been spending more freely as a result. This has seen sales rebounding over the past few months after a brief slowdown.
However, the industry still faces several challenges. The restaurant industry grew 3.3% in 2023, while it has grown 1.1% year to date. The broader market index, the S&P 500, has instead jumped 29.3% and 18.8%, respectively, over the same period.
Higher menu prices have been one of the major challenges to sales growth. Also, rising costs are hurting profit margins. Increased pre-opening expenses, higher marketing costs and expenditures related to sales-boosting efforts are putting pressure on restaurants’ margins.
However, restaurant owners are trying to overcome the hurdles by emphasizing digital innovation, sales-boosting strategies, and cost-saving measures. They frequently collaborate with delivery services and digital platforms to increase their sales.
The restaurant industry is likely to get a boost once the Fed starts its rate cuts, which will ease borrowing costs. This is likely to ease operating costs and widen profit margins.
5 Top Restaurant Stocks Promising Growth
We have narrowed our search to five restaurant stocks that have solid growth potential for the rest of 2024 and have seen positive earnings estimate revisions in the last 60 days. Each of our picks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
El Pollo Loco Holdings, Inc.
El Pollo Loco Holdings, Inc. through its subsidiary, develops, franchises, licenses and operates quick-service restaurants under the name El Pollo Loco. LOCO specializes in flame-grilled chicken in a variety of contemporary Mexican-influenced entrees, including specialty chicken burritos, chicken quesadillas, chicken tortilla soup, Pollo Bowls and Pollo Salads.
El Pollo Loco Holdings’ expected earnings growth rate for the current year is 12.7%. The Zacks Consensus Estimate for current-year earnings has improved 12.7% over the past 60 days. LOCO presently carries a Zacks Rank #2.
Image Source: Zacks Investment Research
Meritage Hospitality Group Inc.
Meritage Hospitality Group Inc. specializes in the development and operation of restaurants and leisure properties. MHGU owns and operates casual dining restaurants in Michigan, through brands consisting of Twisted Rooster locations, Crooked Goose location and Freighters Eatery & Taproom location.
Meritage Hospitality Group’s expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 44.3% over the past 60 days. MHGU currently sports a Zacks Rank #1.
Image Source: Zacks Investment Research
Potbelly Corporation
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’s expected earnings growth rate for the current year is 33.3%. The Zacks Consensus Estimate for current-year earnings has improved 11.1% over the past 60 days. PBPB currently carries a Zacks Rank #2.
Image Source: Zacks Investment Research
Texas Roadhouse, Inc.
Texas Roadhouse, Inc. is a full-service, casual dining restaurant chain, which offers assorted seasoned and aged steaks hand-cut daily on the premises and cooked to order over open gas-fired grills. TXRH operates restaurants under the Texas Roadhouse and Aspen Creek names.
Texas Roadhouse’s expected earnings growth rate for the current year is 39.2%. The Zacks Consensus Estimate for current-year earnings has improved 5% over the past 60 days. TXRH presently sports a Zacks Rank #1.
Image Source: Zacks Investment Research
Wingstop
Wingstop franchises and operates restaurants. WING’s operating segment consists of the Franchise and Company segments. WING offers classic wings, boneless wings and tenders that are cooked-to-order, and hand-sauced-and-tossed in various flavors.
Wingstop’s expected earnings growth rate for the current year is 51.2%. The Zacks Consensus Estimate for current-year earnings has improved 10.3% over the past 60 days. WING presently has a Zacks Rank #2.
Image Source: Zacks Investment Research