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5 Restaurant Stocks to Watch as Sales Start Picking Up

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The restaurant and food industry took a bad hit during the pandemic and is still struggling to get back on its feet. In its first sign to bounce back, sales at restaurants and drinking places recorded an impressive jump in January.

Also, according to a new report by the National Restaurant Association, the restaurant industry is poised to bounce back and grow further in 2021. Given that the COVID-19 vaccination drive is in full swing, people are likely to feel more confident and visit eating and drinking places in the days to come.

Sales at Food, Drinking Places Rise in January

Sales at food and drinking places jumped an impressive 6.9% in January from the prior month. The jump comes after several months of decline, when sales plummeted as fewer people stepped out of their homes on fears of contracting the virus.

The gains in January came as a result of overall jump in retail sales, which increased 5.3% to a seven-month high. There are several reasons behind this jump. Given that vaccination is in full swing, people are feeling more confident of stepping out of their homes. Moreover, Congress approved a fresh round of fiscal stimulus in January and checks have started reaching millions of Americans now, thus strengthening their purchasing power.

Sales at restaurants fell after checks from the first round of stimulus exhausted, which saw people spending more on necessities and eating and drinking out less. 

Restaurant Sales Poised to Grow

According to a Restaurant Business Online article, citing a report by the National Restaurant Association, U.S. restaurants are on track for a steady recovery after declining 19.2% in 2020, which was also the most challenging year for the industry. The report says that sales at restaurants and drinking places will increase 10.2% in 2021 to $548.3 billion as many people will be dining out after staying at homes for most of last year. Sales at bars and taverns are projected to grow 80.2% in nominal terms in 2021.

In a separate report, the NDP Group says that during the pandemic restaurants with delivery services performed better as most people were hesitant to step out of their houses. According to the association, delivery now makes up 11% of the total sales generated by restaurants. This is an 86% jump from the pre-pandemic era.

Also, several restaurants are now focusing on drive-thru facilities and online delivery. Hiring too has been on the rise at restaurants lately, which is another good sign ofthe industry trying to bounce back.

Stocks to Watch

The vaccination drivecoupled with the new round of stimulus is both going to strengthen the purchasing power as confidence of consumers in the days to come. Given this scenario, restaurant stocks should appear appealing to investors.

Chipotle Mexican Grill, Inc. (CMG - Free Report) offers a focused menu of burritos, tacos, burrito bowls and salads. Chipotle restaurants feature free-range, hormone-free pork, natural chicken and other meat products cooked through traditional methods and served in a unique atmosphere. 

The company’s expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 7.9% over the past 60 days. Chipotle Mexican Grill carries a Zacks Rank #3 (Hold).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) 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 49.1%. The Zacks Consensus Estimate for current-year earnings has improved 2% over the past 60 days. Brinker International has a Zacks Rank #3.

McDonald’s Corporation (MCD - Free Report) is a leading fast-food chain that currently operates roughly 38,000 restaurants in more than 100 countries. The company mainly operates and franchises quick-service restaurants (QSRs) under the McDonald’s brand. 

The company’s expected earnings growth rate for next year is 38.5%. The Zacks Consensus Estimate for current-year earnings has improved 1.6% over the past 60 days. McDonald’s holds a Zacks Rank #3.

Starbucks Corporation (SBUX - Free Report) is the leading roaster and retailer of specialty coffee in the world. In addition to fresh, rich-brewed coffees, Starbucks’ offerings include many complementary food items and a selection of premium teas and other beverages, sold mainly through the company’s retail stores. 

The company’s expected earnings growth rate for next year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 1.1% over the past 30 days. Starbucks holds a Zacks Rank #3.

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 the current year is 23%. The Zacks Consensus Estimate for current-year earnings has improved 2.3% over the past 60 days. Jack InThe Box carries a Zacks Rank #3.

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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