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5 Restaurant Stocks Investors May Lose Appetite for in 2017
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As 2016 draws to a close, we can look back and say that the U.S. restaurant space has not been too enticing to investors. In fact, same-store sales growth has been rather dull in a difficult sales environment.
Despite economic growth, somewhat lower energy prices and higher income, consumers have increased their spending only modestly on dining out, which resulted in low consumption over the last few months. The situation has turned worse, thanks to higher health care costs and tightened credit availability in the U.S.
Moreover, unfavorable currency, a cooling Chinese economy and a tightening labor market have compounded restaurateurs’ woes. Traffic has also been weak.
Hence, while slowing sales is posing challenges to restaurateurs’ top-line growth, rising labor costs is turning out to be a headwind to their bottom-line improvement.
The restaurant industry has clearly struggled this year, which is being touted as its worst since the recession. What’s even worse is that the industry metrics also point to a not-so-rosy outlook.
In fact, per a report by TDn2K’s Black Box Intelligence, the third quarter of 2016 marked the third consecutive quarter of negative comparable sales for the restaurant industry as a whole.
Moreover, as per NPD Group, traffic at U.S. fast-food restaurants fell 1% in the third quarter, marking the sector’s first traffic decline in five years and continuing the somber mood at the restaurant industry.
In fact, the Zacks categorized Retail-Restaurants industry had gained a mere 2.5% year to date. Also, the industry currently stands at the bottom 42% of the over 250 Zacks categorized industries.
Thus, given the dwindling prospects of the restaurant industry, it is unlikely that things will change for some of its players in the near term. Thus, it would be wise for investors to reshuffle their portfolio, and get rid of stocks that may hurt returns.
Steer Clear of These 5 Stocks in 2017
With the help of the Zacks Stock Screener, we have zeroed in on five stocks in the Retail-Restaurants industry with an unfavorable Zacks Rank. Notably, these stocks are also witnessing downward revisions in estimates, hinting at analysts' skepticism about their future performance.
BJ's Restaurants, Inc. (BJRI - Free Report) owns and operates a chain of high-end casual dining restaurants in the U.S., which serve its signature deep-dish pizzas, salads, sandwiches, burgers, pastas, steaks and hand-crafted beers. Notably, the stock has declined 8.3% year to date.
Moreover, this Zacks Rank #4 (Sell) company expects sales headwinds in the near term because of social and political issues, increasing global uncertainty and weakening consumer confidence which is resulting in continued decline in traffic. Besides, the Zacks Consensus Estimate for the company’s 2016 and 2017 earnings declined 4.9% and 8.5%, respectively, over the last 60 days.
Founded in 1969 in Seattle, WA, and made public in 2002, Red Robin Gourmet Burgers, Inc. (RRGB - Free Report) is a full-service casual dining restaurant chain that serves an assorted range of burgers. Notably, the company has been witnessing rising costs and expenses since the beginning of 2016, mainly due to higher labor costs. Moreover, the stock has lost 12.9% value year to date.
In addition, as the operating environment has become increasingly challenging, the decline in sales volumes has started to impact the returns from new restaurant openings. As a result, Red Robin is slowing down its development plan significantly for 2017 and 2018. Further, this Zacks Rank #4 company has been seeing a downward trend in earnings estimates. Over the past 60 days, the Zacks Consensus Estimate for 2016 and 2017 earnings decreased 8% and 8.7%, respectively.
Headquartered in Miami, FL, Fiesta Restaurant Group, Inc. owns and operates quick-casual restaurants under the Pollo Tropical(R) and Taco Cabana(R) brand names in the U.S. Notably, the company missed the Zacks Consensus Estimate for earnings and revenues in the past three trailing quarters and its stock has witnessed a decline of 11.8% year to date.
Moreover, this Zacks Rank #4 company had lowered its full-year 2016 comps guidance for the Pollo Tropical brand previously and plans to close 10 company-owned Pollo Tropical restaurants. Further, over the past 60 days, the Zacks Consensus Estimate decreased 4.5% and 5.3% for 2016 and 2017 earnings, respectively.
Based in Broomfield, CO, Noodles & Company (NDLS - Free Report) is a fast casual restaurant offering lunch and dinner. It serves noodles, pastas, salads, soups, sandwiches, cheese, meatballs and beverages. In fact, the stock has plunged 48.9% on a year-to date basis.
Notably, this Zacks Rank #4 company had lowered its full-year 2016 outlook earlier. Moreover, the Zacks Consensus Estimate for the company’s 2016 and 2017 earnings declined 3.4% and 11.4%, respectively, over the last 60 days, adding to its troubles.
Based in Vancouver, WA, Papa Murphy's Holdings, Inc. (FRSH - Free Report) operates as a franchisor and operator of the Take 'N' Bake pizza chain in the United States. The company operates in three segments: Domestic Company Stores, Domestic Franchise and International. Notably, the company’s shares have tumbled a significant 58.2% year to date.
Aggressive competition in the pizza segment remains a potent headwind and thus this Zacks Rank #4 company had earlier slashed its Domestic system-wide comps outlook for full-year 2016. And if these weren’t enough, the Zacks Consensus Estimate for the company’s 2016 and 2017 earnings slumped 63% and 73.3%, respectively, over the last 60 days.
You are welcome to download the full, up-to-the-minute list of 220 Zacks Rank #1 ""Strong Buy"" stocks free of charge. There is no better place to start your own stock search. Plus you can access the full list of must-avoid Zacks Rank #5 ""Strong Sells"" and other private research. See the stocks free >>
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5 Restaurant Stocks Investors May Lose Appetite for in 2017
As 2016 draws to a close, we can look back and say that the U.S. restaurant space has not been too enticing to investors. In fact, same-store sales growth has been rather dull in a difficult sales environment.
Despite economic growth, somewhat lower energy prices and higher income, consumers have increased their spending only modestly on dining out, which resulted in low consumption over the last few months. The situation has turned worse, thanks to higher health care costs and tightened credit availability in the U.S.
Moreover, unfavorable currency, a cooling Chinese economy and a tightening labor market have compounded restaurateurs’ woes. Traffic has also been weak.
Hence, while slowing sales is posing challenges to restaurateurs’ top-line growth, rising labor costs is turning out to be a headwind to their bottom-line improvement.
Retail - Restaurants Industry Price Index
Retail - Restaurants Industry Price Index
What Do the Numbers Say?
The restaurant industry has clearly struggled this year, which is being touted as its worst since the recession. What’s even worse is that the industry metrics also point to a not-so-rosy outlook.
In fact, per a report by TDn2K’s Black Box Intelligence, the third quarter of 2016 marked the third consecutive quarter of negative comparable sales for the restaurant industry as a whole.
Moreover, as per NPD Group, traffic at U.S. fast-food restaurants fell 1% in the third quarter, marking the sector’s first traffic decline in five years and continuing the somber mood at the restaurant industry.
In fact, the Zacks categorized Retail-Restaurants industry had gained a mere 2.5% year to date. Also, the industry currently stands at the bottom 42% of the over 250 Zacks categorized industries.
Thus, given the dwindling prospects of the restaurant industry, it is unlikely that things will change for some of its players in the near term. Thus, it would be wise for investors to reshuffle their portfolio, and get rid of stocks that may hurt returns.
Steer Clear of These 5 Stocks in 2017
With the help of the Zacks Stock Screener, we have zeroed in on five stocks in the Retail-Restaurants industry with an unfavorable Zacks Rank. Notably, these stocks are also witnessing downward revisions in estimates, hinting at analysts' skepticism about their future performance.
BJ's Restaurants, Inc. (BJRI - Free Report) owns and operates a chain of high-end casual dining restaurants in the U.S., which serve its signature deep-dish pizzas, salads, sandwiches, burgers, pastas, steaks and hand-crafted beers. Notably, the stock has declined 8.3% year to date.
Moreover, this Zacks Rank #4 (Sell) company expects sales headwinds in the near term because of social and political issues, increasing global uncertainty and weakening consumer confidence which is resulting in continued decline in traffic. Besides, the Zacks Consensus Estimate for the company’s 2016 and 2017 earnings declined 4.9% and 8.5%, respectively, over the last 60 days.
Founded in 1969 in Seattle, WA, and made public in 2002, Red Robin Gourmet Burgers, Inc. (RRGB - Free Report) is a full-service casual dining restaurant chain that serves an assorted range of burgers. Notably, the company has been witnessing rising costs and expenses since the beginning of 2016, mainly due to higher labor costs. Moreover, the stock has lost 12.9% value year to date.
In addition, as the operating environment has become increasingly challenging, the decline in sales volumes has started to impact the returns from new restaurant openings. As a result, Red Robin is slowing down its development plan significantly for 2017 and 2018. Further, this Zacks Rank #4 company has been seeing a downward trend in earnings estimates. Over the past 60 days, the Zacks Consensus Estimate for 2016 and 2017 earnings decreased 8% and 8.7%, respectively.
Headquartered in Miami, FL, Fiesta Restaurant Group, Inc. owns and operates quick-casual restaurants under the Pollo Tropical(R) and Taco Cabana(R) brand names in the U.S. Notably, the company missed the Zacks Consensus Estimate for earnings and revenues in the past three trailing quarters and its stock has witnessed a decline of 11.8% year to date.
Moreover, this Zacks Rank #4 company had lowered its full-year 2016 comps guidance for the Pollo Tropical brand previously and plans to close 10 company-owned Pollo Tropical restaurants. Further, over the past 60 days, the Zacks Consensus Estimate decreased 4.5% and 5.3% for 2016 and 2017 earnings, respectively.
Based in Broomfield, CO, Noodles & Company (NDLS - Free Report) is a fast casual restaurant offering lunch and dinner. It serves noodles, pastas, salads, soups, sandwiches, cheese, meatballs and beverages. In fact, the stock has plunged 48.9% on a year-to date basis.
Notably, this Zacks Rank #4 company had lowered its full-year 2016 outlook earlier. Moreover, the Zacks Consensus Estimate for the company’s 2016 and 2017 earnings declined 3.4% and 11.4%, respectively, over the last 60 days, adding to its troubles.
Based in Vancouver, WA, Papa Murphy's Holdings, Inc. (FRSH - Free Report) operates as a franchisor and operator of the Take 'N' Bake pizza chain in the United States. The company operates in three segments: Domestic Company Stores, Domestic Franchise and International. Notably, the company’s shares have tumbled a significant 58.2% year to date.
Aggressive competition in the pizza segment remains a potent headwind and thus this Zacks Rank #4 company had earlier slashed its Domestic system-wide comps outlook for full-year 2016. And if these weren’t enough, the Zacks Consensus Estimate for the company’s 2016 and 2017 earnings slumped 63% and 73.3%, respectively, over the last 60 days.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Where Do Zacks' Investment Ideas Come From?
You are welcome to download the full, up-to-the-minute list of 220 Zacks Rank #1 ""Strong Buy"" stocks free of charge. There is no better place to start your own stock search. Plus you can access the full list of must-avoid Zacks Rank #5 ""Strong Sells"" and other private research. See the stocks free >>