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Time to Buy These Popular Retail Restaurant Stocks?
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Many retail restaurants have provided some lofty returns over the years and if inflation continues to ease a few of these companies may be beneficiaries of a stronger consumer.
Let’s take a look at three retail restaurants investors may want to consider for 2023 and beyond.
Starting the list is Chipotle, and its lofty stock price is an indication of the company’s immense popularity. The operator of Mexican food restaurant chains has produced incredible returns for investors.
In the past year, CMG’s price return has been virtually flat to outperform the S&P 500’s -16% decline and roughly match the Retail-Food & Restaurants Markets +1%. Even better, over the last decade CMG’s very stellar +412% has crushed the benchmark’s +167% and its Zacks Subindustry’s +133%.
Image Source: Zacks Investment Research
Chipotle’s shares currently trade at $1,512 per share and 34.7X forward earnings. This is above the industry average of 21.7X but Chipotle is a proven industry leader. Plus, Chipotle stock trades well below its decade high of 231.6X and at a 30% discount to the median of 49.6X.
With Chipotle trading attractively relative to its past the stock currently lands a Zacks Rank #3 (Hold) with its bottom line growth starting to stick out again as well. Chipotle’s earnings are now expected to climb 31% for its fiscal 2022 and jump another 28% in FY23 at $42.63 per share. Earnings estimates revisions have slightly gone up for both FY22 and FY23 over the last 90 days.
Another leader among fast-food restaurants that investors may want to consider adding to their portfolio in 2023 is McDonald’s. The famous burger chain has also provided strong historical returns.
Amid higher inflation, McDonald’s affordable pricing has led to its stock acting as a defensive hedge against inflation. Over the last year, MCD stock is up +2% as the S&P 500 dropped and this slightly edges the Retail-Food & Restaurants Markets +1%. Looking at the last decade, MCD’s +190% also beats the benchmark's +167% and its Zacks Subindustry.
Image Source: Zacks Investment Research
Trading around $266, shares of McDonald’s trade at 25.7X forward earnings which is slightly above the industry average of 21.7X. But of course, McDonald’s is a historical industry leader and trades nicely below its decade high of 38.3X and closer to the median of 22.7X.
Image Source: Zacks Investment Research
McDonald’s stock currently sports a Zacks Rank #2 (Buy) with earnings estimate revisions continuing to trend higher over the last week. Fiscal 2022 earnings are now expected to be up 7% and rise another 5% in FY23 at $10.45 a share. In addition to this, McDonald’s stock also provides a very generous 2.2% annual dividend yield.
Last but not least is Yum Brands, which operates iconic fast-food franchises like KFC, Pizza Hut, and Taco Bell. Yum Brands hasn’t had quite the stellar historical performance as McDonald’s and Chipotle stock but could surely benefit from a stronger consumer with its diverse restaurant chains.
Plus, over the last year, YUM stock is virtually flat to also outperform the S&P 500 and remain on par with the Retail-Food & Restaurants Market. In the last decade, YUM’s +98% has trailed the benchmark and its Zack Subindustry.
Image Source: Zacks Investment Research
However, Yum Brands’ stock price may be attractive to some investors compared to the other stocks on the list. Yum Brands stock trades around $128 per share and 25.3X forward earnings. This is slightly above the industry average but below its decade long high of 34.4X and near the median of 24.9X.
Despite earnings estimate revisions slightly down over the last quarter, Yum Brands’ bottom line growth is still solid. Fiscal 2022 earnings are now projected to be virtually flat but pop 15% in FY23 at $5.11 per share. Like McDonald’s, Yum Brands also offers investors a solid dividend with a respectable 1.7% annual yield.
Image Source: Zacks Investment Research
Bottom Line
With these popular retail restaurants already providing a hedge against inflation over the last year, a stronger consumer could help their stocks rally. The strong bottom-line growth in these food chains looks set to continue and earnings estimate revisions could start to trend higher if inflation continues to ease.
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Time to Buy These Popular Retail Restaurant Stocks?
Many retail restaurants have provided some lofty returns over the years and if inflation continues to ease a few of these companies may be beneficiaries of a stronger consumer.
Let’s take a look at three retail restaurants investors may want to consider for 2023 and beyond.
Chipotle Mexican Grill (CMG - Free Report)
Starting the list is Chipotle, and its lofty stock price is an indication of the company’s immense popularity. The operator of Mexican food restaurant chains has produced incredible returns for investors.
In the past year, CMG’s price return has been virtually flat to outperform the S&P 500’s -16% decline and roughly match the Retail-Food & Restaurants Markets +1%. Even better, over the last decade CMG’s very stellar +412% has crushed the benchmark’s +167% and its Zacks Subindustry’s +133%.
Image Source: Zacks Investment Research
Chipotle’s shares currently trade at $1,512 per share and 34.7X forward earnings. This is above the industry average of 21.7X but Chipotle is a proven industry leader. Plus, Chipotle stock trades well below its decade high of 231.6X and at a 30% discount to the median of 49.6X.
With Chipotle trading attractively relative to its past the stock currently lands a Zacks Rank #3 (Hold) with its bottom line growth starting to stick out again as well. Chipotle’s earnings are now expected to climb 31% for its fiscal 2022 and jump another 28% in FY23 at $42.63 per share. Earnings estimates revisions have slightly gone up for both FY22 and FY23 over the last 90 days.
Image Source: Zacks Investment Research
McDonald’s (MCD - Free Report)
Another leader among fast-food restaurants that investors may want to consider adding to their portfolio in 2023 is McDonald’s. The famous burger chain has also provided strong historical returns.
Amid higher inflation, McDonald’s affordable pricing has led to its stock acting as a defensive hedge against inflation. Over the last year, MCD stock is up +2% as the S&P 500 dropped and this slightly edges the Retail-Food & Restaurants Markets +1%. Looking at the last decade, MCD’s +190% also beats the benchmark's +167% and its Zacks Subindustry.
Image Source: Zacks Investment Research
Trading around $266, shares of McDonald’s trade at 25.7X forward earnings which is slightly above the industry average of 21.7X. But of course, McDonald’s is a historical industry leader and trades nicely below its decade high of 38.3X and closer to the median of 22.7X.
Image Source: Zacks Investment Research
McDonald’s stock currently sports a Zacks Rank #2 (Buy) with earnings estimate revisions continuing to trend higher over the last week. Fiscal 2022 earnings are now expected to be up 7% and rise another 5% in FY23 at $10.45 a share. In addition to this, McDonald’s stock also provides a very generous 2.2% annual dividend yield.
Image Source: Zacks Investment Research
Yum Brands (YUM - Free Report)
Last but not least is Yum Brands, which operates iconic fast-food franchises like KFC, Pizza Hut, and Taco Bell. Yum Brands hasn’t had quite the stellar historical performance as McDonald’s and Chipotle stock but could surely benefit from a stronger consumer with its diverse restaurant chains.
Plus, over the last year, YUM stock is virtually flat to also outperform the S&P 500 and remain on par with the Retail-Food & Restaurants Market. In the last decade, YUM’s +98% has trailed the benchmark and its Zack Subindustry.
Image Source: Zacks Investment Research
However, Yum Brands’ stock price may be attractive to some investors compared to the other stocks on the list. Yum Brands stock trades around $128 per share and 25.3X forward earnings. This is slightly above the industry average but below its decade long high of 34.4X and near the median of 24.9X.
Despite earnings estimate revisions slightly down over the last quarter, Yum Brands’ bottom line growth is still solid. Fiscal 2022 earnings are now projected to be virtually flat but pop 15% in FY23 at $5.11 per share. Like McDonald’s, Yum Brands also offers investors a solid dividend with a respectable 1.7% annual yield.
Image Source: Zacks Investment Research
Bottom Line
With these popular retail restaurants already providing a hedge against inflation over the last year, a stronger consumer could help their stocks rally. The strong bottom-line growth in these food chains looks set to continue and earnings estimate revisions could start to trend higher if inflation continues to ease.