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Restaurant Sales Jump YoY in March: 5 Solid Stocks to Buy

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The pandemic has left the restaurant industry in a bad shape, with most companies still struggling to get back on their feet. The first months of the pandemic saw outdoor dining coming to a standstill, as many restaurants downed their shutters. This saw revenues taking a massive hit for most of 2020.

However, in its first sign of bouncing back, restaurant sales have finally started picking up with people spending more in March. Also, hiring at bars and restaurants is up after a long time, giving further indication of the industry’s rebound.

Restaurant Sales Jump in March

According to U.S. Census data released on Apr 15, restaurant sales jumped 36% in March on a year-over-year basis, as people spent more freely with the second round of stimulus checks reaching them.

Sales from food services and drinking places totaled $61.2 billion in March, increasing 13.4% month over month. Although sales are still below the pre-pandemic level, the surge in March comes as a major relief given that the industry till some time back was almost at the brink of collapse.

Exactly a year ago, coronavirus-induced lockdown compelled almost all industries and businesses to close down. However, the restaurant industry struggled to get out of the funkeven after the economy reopened as peoplewere skeptical about outdoor dining. Moreover, due to huge job losses people didn’t spend much during that period except for a few months following the first round of stimulus.

In March 2021, sales rose once again as the second round of stimulus checks started reaching millions.

Restaurant Industry Poised to Grow

Although the second round of stimulus checks played a major role in driving last month’s sales, the good thing is that the industry is gradually getting back on its feet. March sales are just marginally down from the $62.7 billion in sales recorded in March 2019.

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. Also, restaurants have finally started hiring more, which too had come to a halt during the peak months of the pandemic.

According to the Department of Labor, restaurants and bars hired 286,000 employees in February. The March figures too are expected to increase, according to analysts. Besides, the vaccination drive is in full swing. President Joe Biden recently announced that there is enough vaccine for every adult American to receive by the end of May. This may further give people the confidence to dine out, thus driving sales.

Our Choices

Higher sales and hiring are clear signs that the restaurant industry is on track for recovery. Moreover, the new round of stimulus checks coupled with the vaccination drive should strengthen purchasing power in the days to come. In this scenario, restaurant stocks should appear appealing to investors.

Darden Restaurants, Inc. (DRI - Free Report) is one of the largest casual dining restaurant operators worldwide. The company has operations in the United States and Canada with more than 1,700 restaurants.

The company’s expected earnings growth rate for next year is 26.5%. The Zacks Consensus Estimate for current-year earnings has improved 22.2% over the past 60 days. Darden Restaurants sports a Zacks Rank #1 (Strong Buy).You can see the complete list of today’s Zacks #1 Rank stocks here.

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 38.1%. The Zacks Consensus Estimate for current-year earnings has improved 13.6% over the past 60 days. Jack In The Box carries a Zacks Rank #2 (Buy).

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 complimentary 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 0.4% over the past 60 days. Starbucks has a Zacks Rank #2.

Yum Brands, Inc. (YUM - Free Report) is the global leader in multi-branding and offers consumers more choice and convenience at one outlet. The company presently reports through four segments – KFC (44.8% of total revenues in first-quarter 2020), Pizza Hut (18.6%), Taco Bell (35.9%) and Habit Burger Grill (0.7%). 

The company’s expected earnings growth rate for next year is 8.3%. The Zacks Consensus Estimate for current-year earnings has improved 1% over the past 60 days. Yum Brands carries a Zacks Rank #2.

Chuys Holdings, Inc. (CHUY - Free Report) owns and operates full-service restaurants serving a distinct menu of authentic Mexican food. The company offers a menu that includes appetizers, soups and salads, tacos, burritos, enchiladas, fajitas and combination platters.

The company’s expected earnings growth rate for next year is 34.5%. The Zacks Consensus Estimate for current-year earnings has improved 9.7% over the past 60 days. Chuys Holdings has a Zacks Rank #2.

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