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4 Must-Buy Stocks on Solid Jump in Restaurant Sales

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The U.S. restaurant industry put up an impressive show in 2023 despite inflationary pressures that saw the Federal Reserve adopt an aggressive interest rate hike policy. However, consumers continued to spend lavishly at restaurants.

The retail sector saw sales decline during this period, but the restaurant business continued to grow, and the trend has remained in 2024.

Restaurant sales jumped again in January. The Commerce Department said that sales at U.S. bars and restaurants (adjusted for seasonal variation and holiday sales but not for price changes) totaled $95.1 billion in January, jumping 0.7% month over month. On a year-over-year basis, sales at restaurants and bars jumped 6.3% in January.

This came as retail sales fell 0.8% in January. Restaurants are the only service sector in the retail sales report. The steady growth in restaurant sales also shows that consumers are once again spending more on services than on goods.

Also, restaurant sales have been driving overall retail sales for quite some time. The January inflation data that saw the consumer price index (CPI) increasing 0.3% month over month in January and 3.1% year over year, has once again raised concerns about the economy’s health as the Federal Reserve’s chances of cutting interest rates in March have largely faded.

However, despite the concerns, consumers are spending lavishly on eating out. The continued growth in sales can be attributed to enhancements in fundamentals, including modifications in business processes, technology, staffing and floor plans.

Restaurant owners are putting increased emphasis on digital advancements, implementing strategies to enhance sales, and engaging in cost-saving initiatives. The growing influence of the Internet has underscored the significance of digital innovation. Prominent restaurant chains are consistently partnering with delivery services and digital platforms to generate additional sales.

According to the National Restaurant Association (NRA), restaurant sales are projected to hit $1 trillion in 2024. The NRA also projects hiring to increase by 200,000 jobs this year.

Our Choices

Given this scenario, it would be prudent to invest in restaurant stocks. We have narrowed down our search to four stocks, namely Brinker International, Inc. (EAT - Free Report) , Wingstop Inc. (WING - Free Report) , Carrols Restaurant Group, Inc. (TAST - Free Report) and Shake Shack Inc. (SHAK - 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.

Brinker International, Inc. primarily owns, operates, develops and franchises various restaurants under the Chili’s Grill & Bar and Maggiano’s Little Italy brands. EAT took over Chili’s, Inc., a Texas corporation, in September 1983 and completed the acquisition of Maggiano’s in August 1995. Chili’s is a preeminent leader in the bar & grill category of casual dining. The brand has been functioning for over the last 40 years.

Brinker International’s expected earnings growth rate for the current year is 29.7%. The Zacks Consensus Estimate for current-year earnings has improved 2.8% over the past 60 days. EAT currently carries 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 30.8%. The Zacks Consensus Estimate for current-year earnings has improved 0.8% over the past 60 days. WING currently carries a Zacks Rank #2.

Carrols Restaurant Group, Inc. is the largest BURGER KING franchisee in the United States, with over 800 restaurants, and has operated BURGER KING restaurants since 1976.

Carrols Restaurant Group’s expected earnings growth rate for the current year is 170%. The Zacks Consensus Estimate for current-year earnings has improved 2.1% over the past 60 days. TAST presently sports a Zacks Rank #1.

Shake Shack Inc. restaurants operate in the United States and internationally. SHAK operates and grants licenses for Shake Shack restaurants, commonly known as Shacks. Here, Shake Shackpresents a menu featuring burgers, chicken, hot dogs, crinkle-cut fries, shakes, frozen custard, beer, wine and additional offerings.

Shake Shack’s expected earnings growth rate for the current year is 62.2%. The Zacks Consensus Estimate for current-year earnings has improved 27.7% over the past 60 days. SHAK currently has a Zacks Rank #2.

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