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Restaurant Sales Increase in August: 5 Stocks to Buy

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Restaurant sales are finally showing improvement although they are still lagging year over year. All retail sales at U.S. restaurants grew in August according to the National Restaurant Association (NRA). The economy is gradually reopening and businesses are slowly trying to get back on their feet. After taking a beating for months, restaurants and cafes have finally started witnessing growth in sales.

Also, many workers who were furloughed have started joining back indicating that the industry has finally started showing some confidence. Hence it is likely that the restaurant industry will gradually recover over the next few months.

Restaurant Sales, Hiring Increase in August

Food services and drinking sales in August increased from the July figure. All retail sales grew 2.6% from the year-ago period in August to $537.53 billion, according to the NRA. However, it was less than the 4.2% growth posted in August 2019. Some sectors of the industry fared better than others.  On a year-over-year basis, the decline in August sales was still another monthly improvement after the sector's sales fell a revised 19.4% year over year in July and 22.1% in June.

Moreover, food services and drinking places’ jobs totaled 9.8 million in August although it declined 18.7% from a year ago. Also, according to S&P Global Market Intelligence, 11 of the 15 largest publicly traded U.S. restaurants posted stock gains in the month ended Sep 15.

Sales Driving Hiring

Roughly 50% of 12.3 million restaurant and bar workers employed in February lost their jobs in March and April, making the industry one of the hardest hit by the pandemic. However, things started changing with states reopening and, according, to the Labor Department, hotels and restaurants rehired 763,000 workers in May.

Then again, the economy is again being threatened by the high number of COVID-19 cases being reported every day. Online restaurant orders would see a surge in the days ahead should the situation compel people to stay indoors. This could leave restaurants with the need to hire more cooks, managers and cashiers.

Our Choices

Given this scenario, restaurant stocks should appear rather appealing to investors. We have shortlisted five stocks with a Zacks Rank #1 (Strong Buy) or 2 (Buy) that are likely to bring sumptuous returns in the coming days.You can see the complete list of today’s Zacks #1 Rank stocks here.

Brinker International, Inc. (EAT - Free Report) primarily owns, operates, develops and franchises various restaurants under Chili’s Grill & Bar (Chili’s) and Maggiano’s Little Italy (Maggiano’s) brands. 

The company’s expected earnings growth rate for the current year is 19.9%. The Zacks Consensus Estimate for current-year earnings has improved 60.2 over the past 60 days. Brinker International flaunts a Zacks Rank #1.

Jack In The Box Inc. (JACK - Free Report) operates and franchises through Jack In The Box quick-service restaurants, and is one of the nation’s largest hamburger chains. Based on the number of restaurants, the company’s top 10 markets comprise nearly 70% of the total system.

The company’s expected earnings growth rate for next year is 17.6%. The Zacks Consensus Estimate for current-year earnings has improved 13.9% over the past 60 days. Jack In The Boxcarries a Zacks Rank #2.

Dominos Pizza Inc (DPZ - Free Report) , through its subsidiaries, operates as a pizza delivery company in the United States and internationally, with over 15,900 locations in more than 85 markets.

The company’s expected earnings growth rate for the current year is 34.1%. The Zacks Consensus Estimate for current-year earnings has improved 21.5% over the past 60 days. Dominos Pizza carries a Zacks Rank #2.

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 company’s expected earnings growth rate for the current year is 1.3%. The Zacks Consensus Estimate for current-year earnings has improved 68.9% over the past 60 days. El Pollo Locoholds a Zacks Rank #2.

Wingstop Inc. (WING - Free Report) franchises and operates restaurants. It offers cooked-to-order, hand-sauced and tossed chicken wings.

The company’s expected earnings growth rate for the current year is 71.2%. The Zacks Consensus Estimate for current-year earnings has improved 21.4% over the past 60 days. Wingstopcarries a Zacks Rank #2.

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