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5 Restaurant Stocks to Buy on Strong Sales in January
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U.S. restaurant businesses thrived in 2023 after an impressive turnaround in 2022. Sales at U.S. restaurants were not impacted much despite severe inflationary pressure. The momentum is likely to continue in 2024.
Strong Restaurant Sales in January
The Department of Commerce reported that sales at U.S. bars and restaurants (adjusted for seasonal variation and holiday sales but not for price changes) came in at $95.1 billion in January, up 0.7% from December. Year over year, spending on restaurants and bars rose 6.3% in January.
The restaurant space is the main driver of growth for overall retail sales. Steady consumer spending continued in January despite worries that the economy may enter a recession in the near term. Although higher interest rates made customers concerned, they spent lavishly at restaurants and bars.
Innovative Measures
The restaurant industry is gradually witnessing improving sales. The improvement can be attributed to the enhancement in fundamentals such as modifications in business processes, staffing, floor plans and technology.
Restaurant operators’ focus on digital innovation, their sales-building initiatives, and cost- saving 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 consistently gaining from the spike in off-premise sales, which primarily include delivery, takeout, drive-thru, catering, meal kits and off-site options, such as kiosks and food trucks, owing to the coronavirus pandemic. Per the NRA, more than 60% of restaurant foods are consumed off-premise.
By 2025, off-premise is likely to account for approximately 80% of the industry's growth. The idea of providing off-premise offerings along with a connected curbside service is steadily garnering positive customer feedback.
Our Top Picks
We have narrowed our search to five restaurant stocks that have strong growth potential for 2024. These stocks have seen positive earnings estimate revision in the last 60 days. Each of our picks carries either a Zacks Rank # 1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performance of our five picks year to date.
Image Source: Zacks Investment Research
Carrols Restaurant Group Inc. (TAST - Free Report) is the largest BURGER KING franchisee in the United States with over 800 restaurants and has operated BURGER KING restaurants since 1976. TAST operates as a Burger King and Popeyes franchisee.
Zacks Rank #1 Carrols Restaurant Group has an expected revenue and earnings growth rate of 3.8% and 25.5%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 10.7% over the last 30 days.
Brinker International Inc. (EAT - Free Report) primarily owns, operates, develops and franchises various restaurants under Chili’s Grill & Bar (Chili’s) and Maggiano’s Little Italy (Maggiano’s) brands. During the last reported quarter, EAT registered benefits from effective marketing and pricing strategies.
EAT also reported sequential improvements in guest traffic, surpassing industry benchmarks. Also, focus on menu adjustments bodes well. EAT intends to focus on balancing value offerings with margin expansion and adaptability to changing consumer preferences to drive growth.
Zacks Rank #2 Brinker International has an expected revenue and earnings growth rate of 4.9% and 29.7%, respectively, for the current year (ending June 2024). The Zacks Consensus Estimate for current-year earnings has improved 0.5% over the last seven days.
Wingstop Inc. (WING - Free Report) franchises and operates restaurants. WING’s operating segment consists of the Franchise and Company segments. WING offers cooked-to-order, hand-sauced and tossed chicken wings.
Zacks Rank #2 Wingstop has an expected revenue and earnings growth rate of 16.5% and 19%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.3% over the last seven days.
CAVA Group Inc. (CAVA - Free Report) is a category-defining Mediterranean fast-casual restaurant brand which brings heart, health and humanity to food. CAVA offers salads, dips, spreads, toppings, and dressings. CAVA sells its products through whole food markets and grocery stores. CAVA also provides online food ordering services.
Zacks Rank #2 CAVA Group has an expected revenue and earnings growth rate of 17.9% and 32.2%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 7.1% over the last 60 days.
Dave & Buster's Entertainment Inc. (PLAY - Free Report) is benefiting from strategic initiatives, marketing and technology investments. Also, the emphasis on an optimized service model bode well. During the third quarter of fiscal 2023, PLAY opened two new Dave & Buster's stores and one new Main Event store.
In the future, PLAY intends to expand entertainment options and broaden its appeal, thereby making way for increased visit frequency, incremental consumer spending behavior and new guest additions.
Zacks Rank #2 Dave & Buster's Entertainment has an expected revenue and earnings growth rate of 5.4% and 28.6%, respectively, for the current year (ending January 2025). The Zacks Consensus Estimate for current-year earnings has improved 1.7% over the last 30 days.
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5 Restaurant Stocks to Buy on Strong Sales in January
U.S. restaurant businesses thrived in 2023 after an impressive turnaround in 2022. Sales at U.S. restaurants were not impacted much despite severe inflationary pressure. The momentum is likely to continue in 2024.
Strong Restaurant Sales in January
The Department of Commerce reported that sales at U.S. bars and restaurants (adjusted for seasonal variation and holiday sales but not for price changes) came in at $95.1 billion in January, up 0.7% from December. Year over year, spending on restaurants and bars rose 6.3% in January.
The restaurant space is the main driver of growth for overall retail sales. Steady consumer spending continued in January despite worries that the economy may enter a recession in the near term. Although higher interest rates made customers concerned, they spent lavishly at restaurants and bars.
Innovative Measures
The restaurant industry is gradually witnessing improving sales. The improvement can be attributed to the enhancement in fundamentals such as modifications in business processes, staffing, floor plans and technology.
Restaurant operators’ focus on digital innovation, their sales-building initiatives, and cost- saving 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 consistently gaining from the spike in off-premise sales, which primarily include delivery, takeout, drive-thru, catering, meal kits and off-site options, such as kiosks and food trucks, owing to the coronavirus pandemic. Per the NRA, more than 60% of restaurant foods are consumed off-premise.
By 2025, off-premise is likely to account for approximately 80% of the industry's growth. The idea of providing off-premise offerings along with a connected curbside service is steadily garnering positive customer feedback.
Our Top Picks
We have narrowed our search to five restaurant stocks that have strong growth potential for 2024. These stocks have seen positive earnings estimate revision in the last 60 days. Each of our picks carries either a Zacks Rank # 1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performance of our five picks year to date.
Image Source: Zacks Investment Research
Carrols Restaurant Group Inc. (TAST - Free Report) is the largest BURGER KING franchisee in the United States with over 800 restaurants and has operated BURGER KING restaurants since 1976. TAST operates as a Burger King and Popeyes franchisee.
Zacks Rank #1 Carrols Restaurant Group has an expected revenue and earnings growth rate of 3.8% and 25.5%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 10.7% over the last 30 days.
Brinker International Inc. (EAT - Free Report) primarily owns, operates, develops and franchises various restaurants under Chili’s Grill & Bar (Chili’s) and Maggiano’s Little Italy (Maggiano’s) brands. During the last reported quarter, EAT registered benefits from effective marketing and pricing strategies.
EAT also reported sequential improvements in guest traffic, surpassing industry benchmarks. Also, focus on menu adjustments bodes well. EAT intends to focus on balancing value offerings with margin expansion and adaptability to changing consumer preferences to drive growth.
Zacks Rank #2 Brinker International has an expected revenue and earnings growth rate of 4.9% and 29.7%, respectively, for the current year (ending June 2024). The Zacks Consensus Estimate for current-year earnings has improved 0.5% over the last seven days.
Wingstop Inc. (WING - Free Report) franchises and operates restaurants. WING’s operating segment consists of the Franchise and Company segments. WING offers cooked-to-order, hand-sauced and tossed chicken wings.
Zacks Rank #2 Wingstop has an expected revenue and earnings growth rate of 16.5% and 19%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.3% over the last seven days.
CAVA Group Inc. (CAVA - Free Report) is a category-defining Mediterranean fast-casual restaurant brand which brings heart, health and humanity to food. CAVA offers salads, dips, spreads, toppings, and dressings. CAVA sells its products through whole food markets and grocery stores. CAVA also provides online food ordering services.
Zacks Rank #2 CAVA Group has an expected revenue and earnings growth rate of 17.9% and 32.2%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 7.1% over the last 60 days.
Dave & Buster's Entertainment Inc. (PLAY - Free Report) is benefiting from strategic initiatives, marketing and technology investments. Also, the emphasis on an optimized service model bode well. During the third quarter of fiscal 2023, PLAY opened two new Dave & Buster's stores and one new Main Event store.
In the future, PLAY intends to expand entertainment options and broaden its appeal, thereby making way for increased visit frequency, incremental consumer spending behavior and new guest additions.
Zacks Rank #2 Dave & Buster's Entertainment has an expected revenue and earnings growth rate of 5.4% and 28.6%, respectively, for the current year (ending January 2025). The Zacks Consensus Estimate for current-year earnings has improved 1.7% over the last 30 days.