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5 Solid Restaurant Stocks to Buy as Sales Look Poised to Soar
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The U.S. restaurant industry has shown tremendous resilience amid rising prices and inflationary pressures. The industry grew at a solid pace in 2023 and the momentum has continued into this year.
Restaurant Industry Continues to Grow
Sales at U.S. food and drinking places totaled $84.1 billion in February, up 0.4% month over month, the Commerce Department reported. On a year-over-year basis, restaurant sales jumped 6.3% in February.
Higher prices have been hurting overall retail sales but that hasn’t impacted sales at restaurants as an increasing number of Americans are spending lavishly on eating out. Overall retail sales grew just 0.6% month over month in February.
The Federal Reserve’s aggressive monetary tightening campaign that saw it increase interest rates by 525 basis points has been weighing on all major sectors.
Restaurants are the only service industry included in the retail sales report. The steady rise in restaurant sales suggests a shift in consumer spending habits, with individuals allocating more of their budgets to services rather than physical goods.
The steady growth in restaurant sales is being driven by robust consumer spending and a rise in personal income. Consumer spending increased $145.5 billion or 0.8% month over month in February. Personal income rose $66.5 billion or 0.3% month over month in February.
According to the National Restaurant Association’s annual State of the Industry Report, restaurant sales are projected to hit an all-time high of $1.1 trillion in 2024. The projected 10.3% rise above the group's initial sales projection for 2023 would propel total industry revenues beyond the trillion-dollar mark for the first time.
Our Choices
Given this scenario, it would be prudent to invest in restaurant stocks. We have narrowed down our search to five stocks, namely CAVA Group, Inc. (CAVA - Free Report) , Brinker International, Inc. (EAT - Free Report) , Yum China Holdings, Inc. (YUMC - Free Report) , Kura Sushi USA, Inc. (KRUS - Free Report) and Shake Shack Inc. (SHAK - Free Report) .
CAVA Group, Inc. is a category-defining Mediterranean fast-casual restaurant brand, which brings heart, health and humanity to food. CAVA is based in Washington.
CAVA Group’s expected earnings growth rate for the current year is 14.3%. The Zacks Consensus Estimate for current-year earnings has improved 60% over the past 60 days. CAVA currently has a Zacks Rank #2.
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 30.7%. The Zacks Consensus Estimate for current-year earnings has improved 1.1% over the past 60 days. EAT currently carries a Zacks Rank #2.
Yum China Holdings, Inc. operates both company-owned and franchised restaurants. YUMC’s brands include The KFC, Pizza Hut and Taco Bell. The company also owns East Dawning, Little Sheep, and COFFii & JOY.
Yum China Holdings’ expected earnings growth rate for the current year is 9.5%. The Zacks Consensus Estimate for current-year earnings has improved 2.3% over the past 60 days. YUMC currently has a Zacks Rank #2.
Kura Sushi USA, Inc. operates as a restaurant. KRUS offers nigiri, roll, hand roll, gunkan and desserts. Kura Sushi USA Inc. is based in Irvine.
Kura Sushi USA’s expected earnings growth rate for the current year is 164.3%. The Zacks Consensus Estimate for current-year earnings has improved 8.8% over the past 60 days. Currently, KRUS carries a Zacks Rank #2.
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 91.9%. The Zacks Consensus Estimate for current-year earnings has improved 47.9% over the past 60 days. SHAK currently has a Zacks Rank #2.
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5 Solid Restaurant Stocks to Buy as Sales Look Poised to Soar
The U.S. restaurant industry has shown tremendous resilience amid rising prices and inflationary pressures. The industry grew at a solid pace in 2023 and the momentum has continued into this year.
Restaurant Industry Continues to Grow
Sales at U.S. food and drinking places totaled $84.1 billion in February, up 0.4% month over month, the Commerce Department reported. On a year-over-year basis, restaurant sales jumped 6.3% in February.
Higher prices have been hurting overall retail sales but that hasn’t impacted sales at restaurants as an increasing number of Americans are spending lavishly on eating out. Overall retail sales grew just 0.6% month over month in February.
The Federal Reserve’s aggressive monetary tightening campaign that saw it increase interest rates by 525 basis points has been weighing on all major sectors.
Restaurants are the only service industry included in the retail sales report. The steady rise in restaurant sales suggests a shift in consumer spending habits, with individuals allocating more of their budgets to services rather than physical goods.
The steady growth in restaurant sales is being driven by robust consumer spending and a rise in personal income. Consumer spending increased $145.5 billion or 0.8% month over month in February. Personal income rose $66.5 billion or 0.3% month over month in February.
According to the National Restaurant Association’s annual State of the Industry Report, restaurant sales are projected to hit an all-time high of $1.1 trillion in 2024. The projected 10.3% rise above the group's initial sales projection for 2023 would propel total industry revenues beyond the trillion-dollar mark for the first time.
Our Choices
Given this scenario, it would be prudent to invest in restaurant stocks. We have narrowed down our search to five stocks, namely CAVA Group, Inc. (CAVA - Free Report) , Brinker International, Inc. (EAT - Free Report) , Yum China Holdings, Inc. (YUMC - Free Report) , Kura Sushi USA, Inc. (KRUS - 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.
CAVA Group, Inc. is a category-defining Mediterranean fast-casual restaurant brand, which brings heart, health and humanity to food. CAVA is based in Washington.
CAVA Group’s expected earnings growth rate for the current year is 14.3%. The Zacks Consensus Estimate for current-year earnings has improved 60% over the past 60 days. CAVA currently has a Zacks Rank #2.
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 30.7%. The Zacks Consensus Estimate for current-year earnings has improved 1.1% over the past 60 days. EAT currently carries a Zacks Rank #2.
Yum China Holdings, Inc. operates both company-owned and franchised restaurants. YUMC’s brands include The KFC, Pizza Hut and Taco Bell. The company also owns East Dawning, Little Sheep, and COFFii & JOY.
Yum China Holdings’ expected earnings growth rate for the current year is 9.5%. The Zacks Consensus Estimate for current-year earnings has improved 2.3% over the past 60 days. YUMC currently has a Zacks Rank #2.
Kura Sushi USA, Inc. operates as a restaurant. KRUS offers nigiri, roll, hand roll, gunkan and desserts. Kura Sushi USA Inc. is based in Irvine.
Kura Sushi USA’s expected earnings growth rate for the current year is 164.3%. The Zacks Consensus Estimate for current-year earnings has improved 8.8% over the past 60 days. Currently, KRUS carries a Zacks Rank #2.
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 91.9%. The Zacks Consensus Estimate for current-year earnings has improved 47.9% over the past 60 days. SHAK currently has a Zacks Rank #2.