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4 Stocks to Buy as Restaurant Sales Edge Up in May

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The restaurant industry seems to be finally getting back on its feet with the economy further re opening and more people stepping out unhesitatingly to dine out. Also, people are willing to spend more, thanks to the new round of fiscal stimulus that is giving them more purchasing power.

Although retail sales declined in May, sales at bars and restaurants jumped, which is also an indication that people are spending more on services than on goods. Besides, hiring too has been on the rise at restaurants and bars. The rebound comes after almost one year of meager business at restaurants and bars due to the pandemic, which kept people indoors for months.

Restaurant Sales Jump in May

The Commerce Department said on Jun 15, that sales at restaurants and bars rose 1.8% in May on a month-over-month basis. Total receipts at bars and restaurants recorded $67.3 billion. On a year-over-year basis, sales jumped 70.6%. The gap is huge because restaurants were left with almost no customers last year during this time, when the pandemic had just struck and everything had to be shuttered.

Moreover, people didn’t have enough money to shell out at restaurants as millions lost their jobs during that time. That said, restaurant sales have been on the rise for the past three months, indicating that the industry is on track for a rebound.

The jump in restaurant sales comes despite a decline in overall retail sales. The Commerce Department also said that people have lately been spending more on services than goods.

Restaurant Industry Poised to Grow

Till some months back, people feared stepping out of their houses on fears of contracting coronavirus. However, cases have been declining for the past three months, as more people are getting vaccinated.

This has not only instilled more confidence in them but also has made the government ease restrictions. Besides, the new round of stimulus checks from President Joe Biden’s $1.9 trillion coronavirus relief has given people more purchasing power.

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, with further economic reopening, the restaurant industry is again on a hiring spree. In April, the leisure and hospitality hired 331,000 heads, according to the Department of Labor. This is an indication that people have once again started visiting restaurants and that in the coming days, business will boom as more people get vaccinated.

Our Choices

This thus makes for an opportune time to invest in these restaurant stocks. Each of the stocks carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Bloomin Brands, Inc. (BLMN - Free Report) is a casual dining restaurant company with a portfolio of differentiated restaurant concepts. It has five concepts: Outback Steakhouse, Carrabba's Italian Grill, Bonefish Grill, Fleming's Prime Steakhouse and Wine Bar and Roy's.

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 87.7% over the past 60 days.

Dine Brands Global, Inc. (DIN - Free Report) is a full-service dining company. It operates and franchises restaurants under both the Applebee's Neighborhood Grill & Bar and IHOP brands. 

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 40% over the past 60 days.

Ruths Hospitality Group, Inc. (RUTH - Free Report) is the largest fine dining steakhouse company in the United States as measured by the total number of company-owned and franchisee-owned restaurants, with over 150 Ruth's Chris Steak House locations worldwide.

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 77.6% over the past 60 days.

Texas Roadhouse, Inc. (TXRH - Free Report) is a full-service, casual dining restaurant chain, which offers assorted seasoned and aged steaks hand-cut daily on the premises and cooked to order over open gas-fired grills.

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 35.3% over the past 60 days.

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