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4 Restaurant Stocks to Buy on Continued Growth in Sales
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Rising commodity prices haven’t deterred Americans from spending at restaurants. While the retail sector has somehow managed to stay afloat amid soaring inflation, the restaurant industry has so far managed to put up a decent show, with sales surging almost every month. This, at the same time, proves that people have once again started spending more on services and less on goods.
Sales at U.S. restaurants are expected to get a further boost during the holiday season as more people will be dining out frequently. Also, the restaurant industry has been making solid job additions over the past few months in order to meet customer demand.
Given this scenario, stocks like Wingstop Inc. (WING - Free Report) , Texas Roadhouse, Inc. (TXRH - Free Report) , Cracker Barrel Old Country Store, Inc. (CBRL - Free Report) and Dine Brands Global, Inc. (DIN - Free Report) are likely to benefit in the near term.
Restaurant Sales Jump in October
The Commerce Department said on Nov 16 that sales at U.S. bars and restaurants increased an impressive 1.6% in October. This comes as overall retail sales increased 1.3% in October on a month-over-month basis.
The retail sector has been struggling amid soaring commodity prices, which has compelled consumers to cut down on spending. However, the restaurant industry has managed to put up an impressive show, with sales increasing almost every month.
October’s jump in restaurant sales follows a 0.5% rise in September.
Since the economy reopened after the COVID-induced lockdown, people have been dining out more frequently, thus the steady increase in sales at bars and restaurants doesn’t come as a surprise.
The restaurant industry suffered the most in March and April 2020 as a result of the coronavirus outbreak. After that, sales began to increase again, but the recovery was unstable because COVID-related restrictions remained in place and many people were still reluctant to confidently engage in social interactions.
Sales have finally returned to their pre-pandemic levels and are expected to increase in the coming months, marking the sector's first signs of recovery.
Additionally, consumers spend more on services than on things during normal times. This changed during the pandemic, with people spending more on goods than services as there weren't many options.
However, people are once again spending more on services. Sales at bars and restaurants are the only service category in the retail sales report. This has also been boosting sales at bars and restaurants.
Challenges Aplenty
Rising prices are posing a major threat to sales growth, and restaurant operators are making an attempt to combat these issues. Restaurant owners are emphasizing digital innovation, making efforts to boost sales, and adopting cost-cutting measures, which have been helping the industry’s recovery.
Digital innovation is now essential due to the Internet's expanding significance. Revenues have increased as large restaurant chains are regularly using delivery services and online platforms to increase sales.
The sector has also been adding many jobs. According to the Labor Department, the leisure and hospitality sector added 35,000 jobs in October. However, the industry is still 1.1 million jobs below the pre-pandemic level.
That said, more jobs are likely to be added during the holiday season as sales are expected to get a further boost, which will aid in the industry’s recovery.
Wingstop Inc. franchises and operates restaurants. WING’s operates through the Franchise segment and the Company segment. Wingstop offers cooked-to-order, hand-sauced and tossed chicken wings.
Wingstop’sexpected earnings growth rate for the current year is 22.2%. The Zacks Consensus Estimate for current-year earnings has improved 5.1% over the past 60 days. WING currently sports a Zacks Rank #1.
Texas Roadhouse, Inc. 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. TXRH operates restaurants under the Texas Roadhouse and Aspen Creek names. Texas Roadhouse also offers its guests a selection of ribs, fish, seafood, chicken, pork chops, pulled pork and vegetable plates, an assortment of hamburgers, salads and sandwiches.
Texas Roadhouse’s expected earnings growth rate for the current year is 16.3%. The Zacks Consensus Estimate for current-year earnings has improved 6.3% over the past 60 days. TXRH currently has a Zacks Rank #2.
Cracker Barrel Old Country Store, Inc. is engaged in the ownership and operation of full-service restaurants, with a restaurant and a retail store in the same unit. CBRL serves home-style country food, including meatloaf, homemade chicken n' dumplings as well as its signature biscuits using an old family recipe.
Cracker Barrel Old Country Store’s expected earnings growth rate for the current year is 7.1%. The Zacks Consensus Estimate for current-year earnings has improved 7.6% over the past 60 days. CBRL currently has a Zacks Rank #2.
Dine Brands Global, Inc. is a full-service dining company. DIN operates and franchises restaurants under both the Applebee's Neighborhood Grill & Bar and IHOP brands. Dine Brands Global’s Applebee's restaurants offer casual food, drinks, casual dining, and table services and IHOP restaurants provide full-table services, and food and beverage offerings.
Dine Brands Global’s expected earnings growth rate for next year is 14.1%. The Zacks Consensus Estimate for current-year earnings has improved 4.3% over the past 60 days. DIN currently has a Zacks Rank #2.
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4 Restaurant Stocks to Buy on Continued Growth in Sales
Rising commodity prices haven’t deterred Americans from spending at restaurants. While the retail sector has somehow managed to stay afloat amid soaring inflation, the restaurant industry has so far managed to put up a decent show, with sales surging almost every month. This, at the same time, proves that people have once again started spending more on services and less on goods.
Sales at U.S. restaurants are expected to get a further boost during the holiday season as more people will be dining out frequently. Also, the restaurant industry has been making solid job additions over the past few months in order to meet customer demand.
Given this scenario, stocks like Wingstop Inc. (WING - Free Report) , Texas Roadhouse, Inc. (TXRH - Free Report) , Cracker Barrel Old Country Store, Inc. (CBRL - Free Report) and Dine Brands Global, Inc. (DIN - Free Report) are likely to benefit in the near term.
Restaurant Sales Jump in October
The Commerce Department said on Nov 16 that sales at U.S. bars and restaurants increased an impressive 1.6% in October. This comes as overall retail sales increased 1.3% in October on a month-over-month basis.
The retail sector has been struggling amid soaring commodity prices, which has compelled consumers to cut down on spending. However, the restaurant industry has managed to put up an impressive show, with sales increasing almost every month.
October’s jump in restaurant sales follows a 0.5% rise in September.
Since the economy reopened after the COVID-induced lockdown, people have been dining out more frequently, thus the steady increase in sales at bars and restaurants doesn’t come as a surprise.
The restaurant industry suffered the most in March and April 2020 as a result of the coronavirus outbreak. After that, sales began to increase again, but the recovery was unstable because COVID-related restrictions remained in place and many people were still reluctant to confidently engage in social interactions.
Sales have finally returned to their pre-pandemic levels and are expected to increase in the coming months, marking the sector's first signs of recovery.
Additionally, consumers spend more on services than on things during normal times. This changed during the pandemic, with people spending more on goods than services as there weren't many options.
However, people are once again spending more on services. Sales at bars and restaurants are the only service category in the retail sales report. This has also been boosting sales at bars and restaurants.
Challenges Aplenty
Rising prices are posing a major threat to sales growth, and restaurant operators are making an attempt to combat these issues. Restaurant owners are emphasizing digital innovation, making efforts to boost sales, and adopting cost-cutting measures, which have been helping the industry’s recovery.
Digital innovation is now essential due to the Internet's expanding significance. Revenues have increased as large restaurant chains are regularly using delivery services and online platforms to increase sales.
The sector has also been adding many jobs. According to the Labor Department, the leisure and hospitality sector added 35,000 jobs in October. However, the industry is still 1.1 million jobs below the pre-pandemic level.
That said, more jobs are likely to be added during the holiday season as sales are expected to get a further boost, which will aid in the industry’s recovery.
Our Choices
Given this situation, it would be ideal to invest in these four restaurant stocks. Each of these stocks carries a Zacks Rank #1 (Strong Buy) or #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Wingstop Inc. franchises and operates restaurants. WING’s operates through the Franchise segment and the Company segment. Wingstop offers cooked-to-order, hand-sauced and tossed chicken wings.
Wingstop’sexpected earnings growth rate for the current year is 22.2%. The Zacks Consensus Estimate for current-year earnings has improved 5.1% over the past 60 days. WING currently sports a Zacks Rank #1.
Texas Roadhouse, Inc. 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. TXRH operates restaurants under the Texas Roadhouse and Aspen Creek names. Texas Roadhouse also offers its guests a selection of ribs, fish, seafood, chicken, pork chops, pulled pork and vegetable plates, an assortment of hamburgers, salads and sandwiches.
Texas Roadhouse’s expected earnings growth rate for the current year is 16.3%. The Zacks Consensus Estimate for current-year earnings has improved 6.3% over the past 60 days. TXRH currently has a Zacks Rank #2.
Cracker Barrel Old Country Store, Inc. is engaged in the ownership and operation of full-service restaurants, with a restaurant and a retail store in the same unit. CBRL serves home-style country food, including meatloaf, homemade chicken n' dumplings as well as its signature biscuits using an old family recipe.
Cracker Barrel Old Country Store’s expected earnings growth rate for the current year is 7.1%. The Zacks Consensus Estimate for current-year earnings has improved 7.6% over the past 60 days. CBRL currently has a Zacks Rank #2.
Dine Brands Global, Inc. is a full-service dining company. DIN operates and franchises restaurants under both the Applebee's Neighborhood Grill & Bar and IHOP brands. Dine Brands Global’s Applebee's restaurants offer casual food, drinks, casual dining, and table services and IHOP restaurants provide full-table services, and food and beverage offerings.
Dine Brands Global’s expected earnings growth rate for next year is 14.1%. The Zacks Consensus Estimate for current-year earnings has improved 4.3% over the past 60 days. DIN currently has a Zacks Rank #2.