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Time for Restaurant ETF on Solid Q1 Earnings, Fundamentals?

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The restaurant sector has been gaining from the expected economic boom backed by the reopening. The Retail – Restaurants industry has seen price advancements of 11.8% this year and 5.5% past month. Corporate earnings released lately have been pretty upbeat. Below we highlight a few of them:

Earnings in Detail

On April 29, Zacks Rank #3 (Hold) McDonald's Corporation (MCD - Free Report) reported first-quarter 2021 results, wherein both earnings and revenues outpaced the Zacks Consensus Estimate. A robust drive-thru presence and its investments in delivery and digital over the past few years have aided the company amid the ongoing crisis.

McDonald's reported adjusted earnings of $1.92 per share, surpassing the Zacks Consensus Estimate of $1.81. Revenues of $5.12 billion beat the Zacks Consensus Estimate of $5.05 billion. Despite restrictions in various parts of the world, its first-quarter 2021 global comparable sales and revenues surpassed first-quarter 2019 levels.

On Apr 28, Zacks Rank #2 (Buy) Yum Brands Inc.(YUM - Free Report) reported adjusted earnings of $1.07 that beat the Zacks Consensus Estimate of 85 cents by 25.9%. Total revenues of $1.49 billion surpassed the consensus estimate of $1.46 billion by 1.7%. Revenues from KFC, Pizza Hut and Taco Bell rose 10%, 7% and 8% in the quarter.

On Apr 29, Zacks Rank #1 (Strong Buy) Texas Roadhouse (TXRH - Free Report) came up with quarterly earnings of 91 cents per share, breezing past the Zacks Consensus Estimate of 59 cents per share. This compares to earnings of 23 cents per share a year ago. Its revenues of $800.63 million also topped the Zacks Consensus Estimate by 7.49%.

In late April, Domino's Pizza Inc.’s (DPZ - Free Report) earnings and revenues topped their respective Zacks Consensus Estimate.  Adjusted earnings per share of $3.00 per share beat the Zacks Consensus Estimate by 2% while revenues of $983.7 million topped the consensus mark of $978.6 million.

In May, Restaurant Brands (QSR - Free Report) which operates through three segments — Tim Hortons, Burger King and Popeye’s Louisiana Kitchen — reported adjusted earnings of 55 cents per share that surpassed the Zacks Consensus Estimate of by 10% and increased 14.6% year over year. Net revenues of $1.26 billion topped the consensus mark of $1.25 billion and increased 2.9% on a year-over-year basis, owing to favorable FX movements.

Meanwhile,Wendy's (WEN - Free Report) breakfast daypart offerings are showing promise despite the pandemic. Wendy's CEO Todd Penegor sees the breakfast initiative launched on Mar 2, 2020 to hit at least $1 billion in sales by the end of 2022.

ETF in Focus

The upbeat results discussed above makes the case intriguing for investing in the pure-play AdvisorShares Restaurant ETF (EATZ - Free Report) . Jack In The Box (6.24%), Yum Brands (5.67%) and Del Taco (5.59%) are the top three holdings of the fund. The fund charges 79 bps in fees. In the past five days (the period thick with earnings releases), the fund has added about 2% (as of May 4, 2021) versus the 0.4% dip in the S&P 500-based ETF (SPY - Free Report) .

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