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4 Restaurant Stocks to Buy on Strong Sales

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The U.S. restaurant industry is showing signs of an impressive turnaround in 2022 after two pandemic-ridden years. This industry suffered major jolts during the coronavirus outbreak due to lockdowns and other restrictive norms to maintain social distancing.

However, the massive implementation of COVID-19 vaccines by the U.S. government in 2021 and complete reopening of the economy, acted as major boost to the restaurant and bar industry. Investment in restaurant stocks with a favorable Zacks Rank should be prudent going forward. Four such stocks are — The ONE Group Hospitality Inc. (STKS - Free Report) , Potbelly Corp. (PBPB - Free Report) , Arcos Dorados Holdings Inc. (ARCO - Free Report) and  BBQ Holdings Inc. .

Restaurant Sales Rebound

On Jun 15, the Department of Commerce reported that the retail sales fell unexpectedly by 0.3% in May compared with a gain of 0.7% in April. Mounting inflation compelled Americans to pull back purchases.

However, despite the decline of overall retail sales, the report revealed that sales of restaurants and bars increased 0.7% month over month and 17.5% year over year in May. For the first five months of 2022, sales of restaurants and bars surged 23.6% year over year.

Restaurant operators’ focus on digital innovation, sales building initiatives and cost savings efforts have been acting as the major catalysts. With the growing influence of the Internet, digital innovation has become the need of the hour. Big restaurant chains are constantly partnering with delivery channels and digital platforms to drive incremental sales.

The restaurant industry is gradually witnessing improving sales. Per the industry body, the National Restaurant Association (NRA), sales of the restaurant and bars industry is forecast to reach $898 billion in 2022. The improvement can be attributed to the enhancement in fundamentals such as modifications in business processes, staffing, floor plans and technology.

The industry participants are hiring indicating that the industry is finally coming out of the woods. The NRA has projected the industry to recruit 400,000 manpower to reach 14.9 million at the end of 2022.

Our Top Picks

We have narrowed our search to four restaurant stocks that have strong growth potential for the rest of 2022. These stocks have seen positive earnings estimate revision in the last 60 days. Each of our picks carries a Zacks Rank # 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The chart below shows the price performance of our four picks in the past three months.

Zacks Investment Research
Image Source: Zacks Investment Research

The ONE Group Hospitality develops, manages and operates a portfolio of high-energy restaurants, lounges and bars. STKS also provides food and beverage hospitality solutions. The ONE Group Hospitality’s primary restaurant brand is STK, which is a steakhouse concept with locations in metropolitan cities throughout the United States and in London.

STKS provides ONE Hospitality, a signature turn-key food and beverage service for hospitality venues including, hotels, casinos and other high-end locations both nationally and internationally.

The ONE Group Hospitality has an expected earnings growth rate of 27.1% for the current year. The Zacks Consensus Estimate for the current year has improved 1.4% over the last 60 days.

Potbelly owns, operates, and franchises Potbelly sandwich shops. PBPB manages establishments for consuming food on premises to offers sandwiches, salads, soups, chili, chips, cookies, ice cream, and smoothies. Potbelly serves customers throughout the United States.

Potbelly has an expected earnings growth rate of 94.2% for the current year. The Zacks Consensus Estimate for the current year has improved more than 100% over the last 7 days.

Arcos Dorados operates as a franchisee of McDonald's with its operations divided in Brazil, North Latin America division, South Latin America and the Caribbean division. ARCO also runs quick service restaurants in Latin America and the Caribbean.

Arcos Dorados has operations in territories in Latin America and the Caribbean, including Argentina, Aruba, Brazil, Chile, Colombia, Costa Rica, Curaçao, Ecuador, French Guiana, Guadeloupe, Martinique, Mexico, Panama, Peru, Puerto Rico, Uruguay, the U.S. Virgin Islands of St. Croix and St. Thomas, and Venezuela.

Arcos Dorados has an expected earnings growth rate of 83.3% for the current year. The Zacks Consensus Estimate for the current year has improved 10% over the last 30 days.

BBQ Holdings operates and franchises barbeque restaurants and blues clubs. BBQ currently owns locations and franchises locations in Minnesota, Wisconsin, Illinois, Iowa, Nebraska, Utah, Maryland and Virginia. BBQ Holdings’ menu features award-winning barbecued and grilled meats, an ample selection of salads, side items, sandwiches and unique desserts.

BBQ Holdings has an expected earnings growth rate of 67.6% for the current year. The Zacks Consensus Estimate for the current year has improved 0.9% over the last 60 days.

In-Depth Zacks Research for the Tickers Above

Normally $25 each - click below to receive one report FREE:

Potbelly Corporation (PBPB) - free report >>

Arcos Dorados Holdings Inc. (ARCO) - free report >>

The ONE Group Hospitality, Inc. (STKS) - free report >>