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Add These 5 Stocks to Your Portfolio on Soaring Restaurant Sales
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The U.S. restaurant industry made a solid turnaround last year after a disappointing 2022 and continued to perform despite inflationary pressures. Sales soared as Americans continued to spend lavishly on eating out, helping the industry recover from the setback during the peak of the COVID-19 pandemic.
The Commerce Department reported last week that sales at U.S. bars and restaurants totaled $96.1 billion in December, increasing 8.7% month over month. On a year-over-year basis, restaurant sales jumped a whopping 11.3% in December.
The retail sector suffered in 2023 as consumers cut down on expenses owing to higher costs as the Federal Reserve adopted an aggressive interest rate hike regime to fight multi-decade high inflation. However, restaurants, which is the only service category in the retail sales report, continued to put on an impressive show.
Restaurants became the main driver for overall retail sales in 2023. In the retail sector, the Zacks Defined Restaurant Industry is currently ranked in the upper 45% among all industries, boasting a year-to-date return of 6.5%.
Restaurant Industry Poised to Flourish
The restaurant industry is seeing a steady uptick in sales, which can be attributed to improvements in fundamental aspects like adjustments in business operations, staffing, floor layouts and technology.
Key catalysts for this positive trend include restaurant operators' emphasis on initiatives to boost sales, digital innovation, and efforts to reduce costs. Also, digital innovation is increasingly becoming important as millions are ordering food online.
Major restaurant chains are consistently forming partnerships with delivery services and digital platforms to generate additional sales.
The current outlook is optimistic and the restaurant industry is poised to thrive in 2024, driven by expectations that the Federal Reserve is gearing up to end its interest rate hike regime soon. The Federal Reserve kept its benchmark policy rate steady in the current range of 5.25-5.50% in its past three FOMC meetings.
Expectations are high now that the central bank will go for at least three interest rate cuts in 2024. Lower interest rates bode well for the economy as they give consumers more spending power.
Given this scenario, it would be prudent to invest in restaurant stocks.
Arcos Dorados Holdings Inc. operates as a franchisee of McDonald's, with its operations divided into Brazil, the 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’ expected earnings growth rate for the current year is 18.8%. The Zacks Consensus Estimate for current-year earnings has improved 9.3% over the past 60 days. Currently, ARCO has a Zacks Rank #2.
Chipotle Mexican Grill, Inc., together with its subsidiaries, operates quick-casual and fresh Mexican food restaurant chains. CMG offers a focused menu of burritos, tacos, burrito bowls (a burrito without the tortilla) and salads.
Chipotle Mexican Grill’s expected earnings growth rate for the current year is 34.5%. The Zacks Consensus Estimate for current-year earnings has improved more than 0.1% over the past 60 days. CMG currently carries a Zacks Rank #2.
Chuy's Holdings, Inc. owns and operates full-service restaurants, serving a distinct menu of authentic Mexican food. CHUY offers a menu that includes appetizers, soups and salads, tacos, burritos, enchiladas, fajitas and combination platters. Chuy's Holdings, which is headquartered in Austin, TX, operates chains throughout Texas, Alabama, Indiana, Kentucky and Tennessee.
Chuy's Holdings’ expected earnings growth rate for the current year is 38.7%. The Zacks Consensus Estimate for current-year earnings has improved 0.5% over the past 60 days. CHUY presently sports a Zacks Rank #1.
Darden Restaurants, Inc. is one of the largest casual dining restaurant operators worldwide. DRI has operations in the United States and Canada, with more than 1,700 restaurants.
Darden Restaurants’ expected earnings growth rate for the current year is 10.9%. The Zacks Consensus Estimate for current-year earnings has improved 1.1% over the past 60 days. DRI currently has a Zacks Rank #2.
Wingstop Inc. franchises and operates restaurants. WING’s operating segment consists of the Franchise and Company segments. Wingstop offers cooked-to-order, hand-sauced and tossed chicken wings.
Wingstop’sexpected earnings growth rate for the current year is 30.3%. The Zacks Consensus Estimate for current-year earnings has improved 0.8% over the past 60 days. WING currently carries a Zacks Rank #2.
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Add These 5 Stocks to Your Portfolio on Soaring Restaurant Sales
The U.S. restaurant industry made a solid turnaround last year after a disappointing 2022 and continued to perform despite inflationary pressures. Sales soared as Americans continued to spend lavishly on eating out, helping the industry recover from the setback during the peak of the COVID-19 pandemic.
The Commerce Department reported last week that sales at U.S. bars and restaurants totaled $96.1 billion in December, increasing 8.7% month over month. On a year-over-year basis, restaurant sales jumped a whopping 11.3% in December.
The retail sector suffered in 2023 as consumers cut down on expenses owing to higher costs as the Federal Reserve adopted an aggressive interest rate hike regime to fight multi-decade high inflation. However, restaurants, which is the only service category in the retail sales report, continued to put on an impressive show.
Restaurants became the main driver for overall retail sales in 2023. In the retail sector, the Zacks Defined Restaurant Industry is currently ranked in the upper 45% among all industries, boasting a year-to-date return of 6.5%.
Restaurant Industry Poised to Flourish
The restaurant industry is seeing a steady uptick in sales, which can be attributed to improvements in fundamental aspects like adjustments in business operations, staffing, floor layouts and technology.
Key catalysts for this positive trend include restaurant operators' emphasis on initiatives to boost sales, digital innovation, and efforts to reduce costs. Also, digital innovation is increasingly becoming important as millions are ordering food online.
Major restaurant chains are consistently forming partnerships with delivery services and digital platforms to generate additional sales.
The current outlook is optimistic and the restaurant industry is poised to thrive in 2024, driven by expectations that the Federal Reserve is gearing up to end its interest rate hike regime soon. The Federal Reserve kept its benchmark policy rate steady in the current range of 5.25-5.50% in its past three FOMC meetings.
Expectations are high now that the central bank will go for at least three interest rate cuts in 2024. Lower interest rates bode well for the economy as they give consumers more spending power.
Given this scenario, it would be prudent to invest in restaurant stocks.
Our Choices
We have narrowed down our search to five stocks, namely Arcos Dorados Holdings Inc. (ARCO - Free Report) ,Chipotle Mexican Grill, Inc. (CMG - Free Report) , Chuy's Holdings, Inc. (CHUY - Free Report) , Darden Restaurants, Inc. (DRI - Free Report) and Wingstop Inc. (WING - Free Report) .
These stocks have seen positive earnings estimate revisions in the last 60 days. Each of our picks carries a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Arcos Dorados Holdings Inc. operates as a franchisee of McDonald's, with its operations divided into Brazil, the 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’ expected earnings growth rate for the current year is 18.8%. The Zacks Consensus Estimate for current-year earnings has improved 9.3% over the past 60 days. Currently, ARCO has a Zacks Rank #2.
Chipotle Mexican Grill, Inc., together with its subsidiaries, operates quick-casual and fresh Mexican food restaurant chains. CMG offers a focused menu of burritos, tacos, burrito bowls (a burrito without the tortilla) and salads.
Chipotle Mexican Grill’s expected earnings growth rate for the current year is 34.5%. The Zacks Consensus Estimate for current-year earnings has improved more than 0.1% over the past 60 days. CMG currently carries a Zacks Rank #2.
Chuy's Holdings, Inc. owns and operates full-service restaurants, serving a distinct menu of authentic Mexican food. CHUY offers a menu that includes appetizers, soups and salads, tacos, burritos, enchiladas, fajitas and combination platters. Chuy's Holdings, which is headquartered in Austin, TX, operates chains throughout Texas, Alabama, Indiana, Kentucky and Tennessee.
Chuy's Holdings’ expected earnings growth rate for the current year is 38.7%. The Zacks Consensus Estimate for current-year earnings has improved 0.5% over the past 60 days. CHUY presently sports a Zacks Rank #1.
Darden Restaurants, Inc. is one of the largest casual dining restaurant operators worldwide. DRI has operations in the United States and Canada, with more than 1,700 restaurants.
Darden Restaurants’ expected earnings growth rate for the current year is 10.9%. The Zacks Consensus Estimate for current-year earnings has improved 1.1% over the past 60 days. DRI currently has a Zacks Rank #2.
Wingstop Inc. franchises and operates restaurants. WING’s operating segment consists of the Franchise and Company segments. Wingstop offers cooked-to-order, hand-sauced and tossed chicken wings.
Wingstop’sexpected earnings growth rate for the current year is 30.3%. The Zacks Consensus Estimate for current-year earnings has improved 0.8% over the past 60 days. WING currently carries a Zacks Rank #2.