Economic reopening plans have slowed in some states as coronavirus cases spike, including in major economic hubs such as California and Texas. This means many restaurants and bars might remain closed or operate at far lower capacities. But people still want to eat out, which might benefit the take-out and fast-casual restaurants.
Let’s take a look at two highly-ranked Zacks stocks from the broader restaurant space that might be worth buying at the moment…
Domino's Pizza (DPZ - Free Report)
Domino's is a delivery pizza powerhouse that saw its sales pop over 4% for the period ended on March 22. DPZ’s Q1 clearly included very little of the lockdown environment, and it said that its same-store revenue jumped 7.1% between March 23 and April 19, from the same stretch last year. Looking ahead, our Zacks estimates call for DPZ’s Q2 revenue, which it’s set to report on July 16, to jump nearly 11%. Meanwhile, its full-year fiscal 2020 revenue is projected to jump 9% to $3.94 billion and another 5% in FY21—both of which compare well against FY19’s 5% sales growth.
Domino's overall earnings revisions have jumped recently, even as it hires thousands of more workers to meet increased demand. This positivity helps it earn a Zacks Rank #1 (Strong Buy) right now. DPZ also crushed our bottom-line estimate last quarter and it rocks an “A” grade for Growth in our Style Scores system. Domino's shares have jumped 30% in 2020 and 80% in the last three years.
Domino’s has also continued to beef up its digital ordering offerings and its delivery and take-out model should help it shine during the ongoing social distancing push. Plus, DPZ’s 0.81% dividend yield currently tops the 10-year U.S. Treasury note’s 0.60%, and its industry sits in the top 17% of our more than 250 Zacks industries.
Chipotle (CMG - Free Report)
Chipotle and its various burrito-style offerings rose to prominence on the back of the company’s healthy and fresh ingredients. The firm helped popularize the larger fast-casual movement that includes Shake Shack (SHAK - Free Report) and others. CMG shares have been on an impressive run over the last few years and CEO Brian Niccol, who took over in March 2018, has focused on CMG’s digital ordering and delivery expansion. This is part of a larger industry trend that includes everyone from Starbucks (SBUX - Free Report) to McDonald’s (MCD - Free Report) .
Chipotle’s revenue jumped 15% in fiscal 2019 and its stock price is up 145% in the past two years to blow by its industry’s 18% average climb. On the coronavirus front, Chipotle’s first quarter revenue popped 7.8%, with comps up 3.3%. That said, same-store sales fell 16% in March from the year-earlier period as the lockdowns began. However, its digital sales skyrocketed 81% in the first quarter to account for 26% of total revenue.
Chipotle’s second quarter sales are projected to fall nearly 10% from the year-ago period, as its dine-in sales largely evaporated. Its adjusted Q2 earnings are projected to tumble 95% to $0.19 per share. However, its bottom-line estimates are up big recently for the second quarter and fiscal 2020 and 2021, which helps it earn a Zacks Rank #2 (Buy). CMG is also expected to post sales growth in Q3 and see both its top and bottom lines boom in FY21.
On top of that, CMG announced at the end of June a partnership with Grubhub to expand its delivery footprint. That said, it might be prudent to wait for Chipotle’s Q2 results on July 22 before diving in. Yet Wall Street has hardly been deterred. In fact, CMG shares are up 33% in 2020 and 140% since mid-March, which helps it top stay-at-home standouts such as Zoom (ZM - Free Report) and Amazon (AMZN - Free Report) .
Investors might also want to consider highly-ranked restaurant stocks such as Jack In The Box Inc. (JACK - Free Report) , Papa Johns (PZZA - Free Report) , McDonald’s, and others.
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