There’s been a major shift in the spending habits of Americans. Whereas a generation ago Americans were out buying cars and other goods, there’s been a shift towards spending on experiences. A higher percentage of expenditures are going towards vacations and nights out at restaurants. As a result, we saw some breathtaking rallies in restaurant stocks last year. Some of these stocks have gone out to fizzle out. I’m afraid that may be the case with today’s Bear of the Day Fogo de Chao (FOGO).
For those of you who are unfamiliar with the company, Fogo De Chao, Inc. owns and operates Brazilian steakhouses. It offers beef, lamb, chicken, pork and seafood items as well as liquor, beer and wine. The company operates primarily in the United States, Puerto Rico and Brazil. Fogo De Chao, Inc. is headquartered in Dallas, Texas.
The great part about these restaurants is they are all-you-can eat. You get a little chip at your table that you flip from green to red. Green means you’re ready for more food, red means you’re going to take a pass. When it comes to the stock, you may want to flip that chip over to red right now.
FOGO is a Zacks Rank #5 (Strong Sell) right now because of some very bearish analyst behavior. Over the last 60 days, four analysts have dropped their earnings estimates for the current quarter, next quarter, current year, and next year. The bearish attitude is most evident in next year’s numbers. The Zacks Consensus Estimate has dropped from $1.11 to 96 cents. This quarter, analysts are looking for 15 cents EPS out of the coming, following up on last quarter’s 17 cents.
If you’re looking for other restaurant stocks to invest in, you may want to check out a couple of Zacks Rank #2 (Buy) stocks that are on the radar. Brinker (EAT - Free Report) and Buffalo Wild Wings (BWLD) have both seen much more bullish behavior out of analysts lately.
More Stocks to Sell. Now.
Beyond our Bear Stock of the Day, today's list of 220 Zacks Rank #5 Strong Sells demand even more urgent attention. If any are lurking in your portfolio or Watch List, they should be removed immediately. Many appear to be sound investments but, since 1988, such stocks have actually performed more than 11X worse than the S&P 500.
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