With Mother’s Day around the corner on May 13, an increasing number of Americans are planning to eat out. According to a restaurant.org survey, Mother’s Day is the most popular holiday for dining out. And according to a recent National Restaurant Association (NRA) survey, 87 million adults plan to visit restaurants this Mother’s Day.
Understandably, U.S. restaurants are on solid ground. Restaurant sales are picking up, with an increase in wages, a higher number of jobs, greater spending power, high consumer confidence and a bullish economic outlook. Moreover, the outlook for the restaurant industry looks strong for the rest of 2018 as it is poised to grow on higher sales, franchise-based business models and various sales-building efforts.
Mother’s Day Out
According to a recent NRA survey, 34% of those polled — around 87 million adults — plan to eat out on Mother’s Day. Of them, 35% have plans for lunch, while 24% would go out for brunch. Another 11% have made breakfast plans.
Moreover, 47% of the mothers want a restaurant meal with their family as a gift on Mother’s Day. This gives a fair picture of increasing number of people dining out in the United States. This sounds like an encouraging follow-up to the U.S. restaurant sales improvement in March.
U.S. Restaurant to Grow on Higher Sales
The U.S. restaurant industry generated $799 billion in revenues in 2017, reflecting an increase of 4.3% from 2016, according to the NRA. This also marks the eighth consecutive year of real growth in restaurant sales. Moreover, 2018 started on a solid note with positive momentum in sales, as despite lower temperatures and higher-than-average snowfall, footfalls and sales in restaurants grew in April.
Moreover, Restaurant Performance Index (RPI) trended higher in March. The RPI stood at 101.8 in March, up 0.7% from the February level of 101.1. The increase was bolstered by stronger same-stores sales and customer traffic indicators. Also, restaurant operators reported a net increase in sales for the fifth straight month.
Favorable Economic Scenario
The U.S. economy is stepping up, which is a good sign for the restaurant industry. Higher wages, a low jobless rate and upbeat consumer confidence, all indicate a bullish economy. Higher wages mean more money in the hands of people, which definitely is a positive sign for the industry.
Moreover, U.S. consumer confidence touched 128.7 in April, surpassing expectations of 126 and recovering from its fall in March. This positive sentiment is definitely going to reflect in Mother’s Day eating-out plans.
This year, Mother’s Day seems to be coinciding with a favorable economic backdrop that is a blessing for the restaurant space. Restaurant owners reporting net increase in sales for the fifth consecutive month makes this space all the more coveted for investors.
While adding restaurant stocks to your portfolio looks like a smart option now, picking winning stocks may be difficult. We have narrowed down our search to the following stocks based on a good Zacks Rank and other relevant metrics.
Wingstop Inc. (WING - Free Report) franchises and operates restaurants. It offers cooked-to-order, hand-sauced and tossed chicken wings. Wingstop has an expected earnings growth of 9.5% for the current year. The Zacks Consensus Estimate for the current year has improved by 6.6% over the past 30 days. Moreover, the stock has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Denny's Corporation (DENN - Free Report) is one of the largest restaurant companies, operating moderately-priced restaurants: Denny's, Hardee's, Quincy's, El Pollo Loco, Coco's and Carrows.
Denny’s Corporation has a Zacks Rank #2 (Buy). The company has an expected earnings growth of 12.1% for the current year. The Zacks Consensus Estimate for the current year has improved by 14% over the past 30 days.
Brinker International, Inc. (EAT - Free Report) is one of the world's leading casual dining restaurant companies.
The Zacks Rank #2 company has an expected earnings growth of 10.00% for the current year. The Zacks Consensus Estimate for the current year has improved by 0.9% over the past 30 days.
J. Alexander's Holdings, Inc. (JAX - Free Report) owns and operates dining restaurants primarily in the United States.
The company has an expected earnings growth of 5.7% for the current year. Moreover, the Zacks Consensus Estimate for the current year has improved by 12% over the past 60 days. J. Alexander's Holdings carries a Zacks Rank #2.
Fiesta Restaurant Group, Inc. (FRGI - Free Report) owns and operates quick-casual restaurants under the Pollo Tropical(R) and Taco Cabana(R) brand names in the United States.
Fiesta Restaurant Group has a Zacks Rank #2. The company has an expected earnings growth of 3.3% for the current year. The Zacks Consensus Estimate for the current year has improved by 3.3% over the past 30 days.
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