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Solid Job Data Adds Stimulus to Restaurant Space: 4 Picks
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Per the Friday-released Labor Department report, the U.S. economy added an avenue of more-than-expected jobs in May. This positive data on the payroll indicates that the country’s economic slump post the coronavirus outbreak may be on a path to recovery.
According to CNBC, the job rate achieved in May witnessed the maximum surge within a month in U.S. history since at least 1939. The only period to have registered more than a million jobs previous to this was the month of September in 1983. The job rally had then stood at 1.1 million.
U.S. Economy Increases Job Strength in May
Going by the U.S. jobs report for May, the job index reflects the largest one-month gain, showing signs of a V-shaped recovery from the COVID-19 pandemic-led downslide. The U.S. economy unexpectedly added 2.5 million jobs in May, the highest on record, surpassing the estimate of 7.25-million cut.
In March and April, a staggering figure of 22.1 million jobs were lost combining both months’ stats as economic activity was curtailed by the pandemic adversity and the efforts to contain it during the period.
Overall, the unemployment rate was 13.3% in May, down 140 basis compared with the April-level. Also, the unemployment rate bettered the expected 19% reduction.
The change in employment rate for April was revised downward by 150,000 to -20,687,000 while the alteration for March moved south by 492,000 to -1,373,000. Overall, the employment rate over these months was 642,000 lower than what was previously reported.
Mirroring the fallouts of the deadly coronavirus pandemic and its chain-breaking measures, the unemployment rate and the number of jobless persons logged for May is still lower than the 3.5% unemployment rate recorded in February. Average hourly earnings for all employees on private nonfarm payrolls dropped 29 cents to $29.75 following a rise of $1.35 in April. Average hourly earnings of private-sector production and nonsupervisory employees declined 14 cents to $25.00 in May. The variations in average earnings were driven largely by the huge job losses in April and a partial return in May of low-wage earners.
Per CNBC, it appears that businesses began rehiring workers earlier and in greater strength than expected, a trend that is likely to continue as lockdowns ease around the country and if the momentum sustains, the second half of the year should see a robust uptrend.
Sectors That Added Jobs
Approximately 50% of the total job additions for May occurred in the leisure and hospitality space. Personnel were recruited at the food services and drinking places while accommodation saw lay-offs due to depressed demand. This was followed by decent job gains in professional and business service, construction, manufacturing, education and health services, financial activities, retail and wholesale trade. However, retrenchment was reported in government, information, mining and lodging, transportation and warehousing.
Stocks to Buy
Employment in food services and drinking places rose 1.4 million in May as restaurant operators remained confident of improved near-term economic conditions after resumption of economic activities, which were mandatorily closed during the rampant COVID-19 spread.
Since February, the industry has lost a net 4.7 million jobs. The average work week for nonsupervisory employees in food services and drinking place establishments increased to 24 hours in May (an increase of 2.4 hours), mostly offsetting the downward movement noticed in the prior two months.
Domino Pizza Inc. (DPZ - Free Report) : Its pizza category is a fast-growing segment in the U.S. quick-service restaurant industry and Domino’s is one of the largest pizza chains globally. Domino’s continues to impress investors with solid margin growth. Domino’s has a wide franchise network, both domestically and internationally. Notably, an intensified focus on digitalization and international expansion is likely to aid the company in the days ahead.
The stock has seen the Zacks Consensus Estimate for current-year earnings being revised 2.4% upward over the past 30 days. For the ongoing year, the company’s earnings are expected to grow 17.03% against its industry’s decline of 29.1%.
El Pollo Loco Holdings Inc. (LOCO - Free Report) through its subsidiary, develops, franchises, licenses and operates quick-service restaurants under the name El Pollo Loco.
The stock has seen the Zacks Consensus Estimate for current-year earnings being revised 30% upward over the past 60 days. For next year, the company’s earnings are expected to soar 60.5% compared with its industry’s growth of 27.7%.
Papa Johns International Inc. (PZZA - Free Report) is a leading take-away and pizza delivery restaurant chain in the world. Its continued international expansion plans, strategic partnerships, strong digital platform along with various sales initiatives bode well. Also, a deepened focus on digital ordering along with expansion of delivery channels is likely to boost sales.
The stock has seen the Zacks Consensus Estimate for current-year earnings being revised 11% upward over the past 60 days. For the current year, the company’s earnings are expected to grow 23.1% versus its industry’s decline of 29.1%.
Yum China Holdings Inc.’s (YUMC - Free Report) U.S. operations are based in Texas. It has been leveraging the power of its two most important brands, namely
KFC and Pizza Hut to drive long-term growth. Yum China is focused on relentless unit growth of its restaurant chain to drive incremental sales. Another major catalyst for Yum China resides in its continual menu innovation to contribute to its top line.
The stock has seen the Zacks Consensus Estimate for current-year earnings being revised 42% upward over the past 60 days. For next year, the company’s earnings are expected to grow 79% compared with its industry’s growth of 27.7%.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
Image: Shutterstock
Solid Job Data Adds Stimulus to Restaurant Space: 4 Picks
Per the Friday-released Labor Department report, the U.S. economy added an avenue of more-than-expected jobs in May. This positive data on the payroll indicates that the country’s economic slump post the coronavirus outbreak may be on a path to recovery.
According to CNBC, the job rate achieved in May witnessed the maximum surge within a month in U.S. history since at least 1939. The only period to have registered more than a million jobs previous to this was the month of September in 1983. The job rally had then stood at 1.1 million.
U.S. Economy Increases Job Strength in May
Going by the U.S. jobs report for May, the job index reflects the largest one-month gain, showing signs of a V-shaped recovery from the COVID-19 pandemic-led downslide. The U.S. economy unexpectedly added 2.5 million jobs in May, the highest on record, surpassing the estimate of 7.25-million cut.
In March and April, a staggering figure of 22.1 million jobs were lost combining both months’ stats as economic activity was curtailed by the pandemic adversity and the efforts to contain it during the period.
Overall, the unemployment rate was 13.3% in May, down 140 basis compared with the April-level. Also, the unemployment rate bettered the expected 19% reduction.
The change in employment rate for April was revised downward by 150,000 to -20,687,000 while the alteration for March moved south by 492,000 to -1,373,000. Overall, the employment rate over these months was 642,000 lower than what was previously reported.
Mirroring the fallouts of the deadly coronavirus pandemic and its chain-breaking measures, the unemployment rate and the number of jobless persons logged for May is still lower than the 3.5% unemployment rate recorded in February. Average hourly earnings for all employees on private nonfarm payrolls dropped 29 cents to $29.75 following a rise of $1.35 in April. Average hourly earnings of private-sector production and nonsupervisory employees declined 14 cents to $25.00 in May. The variations in average earnings were driven largely by the huge job losses in April and a partial return in May of low-wage earners.
Per CNBC, it appears that businesses began rehiring workers earlier and in greater strength than expected, a trend that is likely to continue as lockdowns ease around the country and if the momentum sustains, the second half of the year should see a robust uptrend.
Sectors That Added Jobs
Approximately 50% of the total job additions for May occurred in the leisure and hospitality space. Personnel were recruited at the food services and drinking places while accommodation saw lay-offs due to depressed demand. This was followed by decent job gains in professional and business service, construction, manufacturing, education and health services, financial activities, retail and wholesale trade. However, retrenchment was reported in government, information, mining and lodging, transportation and warehousing.
Stocks to Buy
Employment in food services and drinking places rose 1.4 million in May as restaurant operators remained confident of improved near-term economic conditions after resumption of economic activities, which were mandatorily closed during the rampant COVID-19 spread.
Since February, the industry has lost a net 4.7 million jobs. The average work week for nonsupervisory employees in food services and drinking place establishments increased to 24 hours in May (an increase of 2.4 hours), mostly offsetting the downward movement noticed in the prior two months.
Amid the improving scenario and demand boost, we taper our search to specific stocks in the Retail – Restaurants space — that are all currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Domino Pizza Inc. (DPZ - Free Report) : Its pizza category is a fast-growing segment in the U.S. quick-service restaurant industry and Domino’s is one of the largest pizza chains globally. Domino’s continues to impress investors with solid margin growth. Domino’s has a wide franchise network, both domestically and internationally. Notably, an intensified focus on digitalization and international expansion is likely to aid the company in the days ahead.
The stock has seen the Zacks Consensus Estimate for current-year earnings being revised 2.4% upward over the past 30 days. For the ongoing year, the company’s earnings are expected to grow 17.03% against its industry’s decline of 29.1%.
El Pollo Loco Holdings Inc. (LOCO - Free Report) through its subsidiary, develops, franchises, licenses and operates quick-service restaurants under the name El Pollo Loco.
The stock has seen the Zacks Consensus Estimate for current-year earnings being revised 30% upward over the past 60 days. For next year, the company’s earnings are expected to soar 60.5% compared with its industry’s growth of 27.7%.
Papa Johns International Inc. (PZZA - Free Report) is a leading take-away and pizza delivery restaurant chain in the world. Its continued international expansion plans, strategic partnerships, strong digital platform along with various sales initiatives bode well. Also, a deepened focus on digital ordering along with expansion of delivery channels is likely to boost sales.
The stock has seen the Zacks Consensus Estimate for current-year earnings being revised 11% upward over the past 60 days. For the current year, the company’s earnings are expected to grow 23.1% versus its industry’s decline of 29.1%.
Yum China Holdings Inc.’s (YUMC - Free Report) U.S. operations are based in Texas. It has been leveraging the power of its two most important brands, namely
KFC and Pizza Hut to drive long-term growth. Yum China is focused on relentless unit growth of its restaurant chain to drive incremental sales. Another major catalyst for Yum China resides in its continual menu innovation to contribute to its top line.
The stock has seen the Zacks Consensus Estimate for current-year earnings being revised 42% upward over the past 60 days. For next year, the company’s earnings are expected to grow 79% compared with its industry’s growth of 27.7%.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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