4 Restaurant Stocks to Boost Your Portfolio on Soaring Sales
The restaurant industry staged a dramatic turnaround last year and has held its ground amid continued inflationary pressures. Sales have grown almost every month this year as consumers continue to spend lavishly on eating out.
The robust sales are being aided by a resilient job market. And with the holiday season around the corner, sales are expected to get a further boost this year-end. Given this scenario, investing in restaurant stocks like Carrols Restaurant Group, Inc. TAST, First Watch Restaurant Group, Inc. FWRG, Kura Sushi USA, Inc. KRUS and Arcos Dorados Holdings Inc. ARCO will be a prudent choice.
Restaurant Sales Jump
Sales at U.S. bars and restaurants jumped a solid 0.9% month over month in September, according to the Commerce Department’s latest retail sales report. Year over year, sales at restaurants increased 9.2%, higher than the overall inflation rate.
This came as overall retail sales grew an impressive 0.7% in September. The retail sector is trying to put up a strong fight amid continuing price challenges. However, restaurant sales have been steadily growing over the past several months.
The restaurant industry had to overcome a number of challenges, such as widespread closures during the peak of the pandemic and a net decline in sales due to sky-high inflation. However, the industry has managed to achieve a remarkable 39% increase in sales since the pandemic.
In fact, the restaurant industry has largely been responsible for driving overall retail sales. Restaurants are the only service sector included in the Commerce Department’s monthly retail sales report.
In the retail sector, the Zacks Defined Restaurant Industry is presently ranked in the upper 30% among all industries.
Inflation has been cooling and has more than halved after peaking at 9.1% in June 2022, thanks to the Fed’s aggressive interest rate hike campaign. The Federal Reserve has hiked interest rates by 525 basis points since March 2022.
However, signs of recovery are finally visible as the Federal Reserve kept its benchmark policy rate unchanged in the range of 5.25-5.5% in its September policy meeting. Moreover, the central bank has hinted at one more 25-basis point hike this year before ending its monetary tightening campaign.
Also, the holiday season is approaching, which is likely to see consumers spending more at restaurants as personal income is allowing them to spend more freely.
Our Choices
Given this situation, it would be ideal to invest in these five restaurant stocks. We have selected four such stocks. Each of these stocks carries a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
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 152.9%. The Zacks Consensus Estimate for current-year earnings has improved 117.6% over the past 90 days. TAST presently sports a Zacks Rank #1.
First Watch Restaurant Group, Inc. is a daytime dining restaurant concept serving made-to-order breakfast, brunch and lunch using fresh ingredients. FWRG offers pancakes, omelets, sandwiches and salads, alongside specialty items like the Quinoa Power Bowl, Avocado Toast and the Chickichanga.
First Watch Restaurant’s expected earnings growth rate for the current year is 236.4%. The Zacks Consensus Estimate for current-year earnings has improved 19.4% over the past 60 days. Currently, FWRG sports a Zacks Rank #1.
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 300%. The Zacks Consensus Estimate for current-year earnings has improved 100% over the past 90 days. Currently, KRUS carries a Zacks Rank #2.
Arcos Dorados Holdings Inc. operates as a franchisee of McDonald's, with its operations divided in Brazil, the North Latin America division, South Latin America and the Caribbean division. ARCO also runs quick-service restaurants in Latin America and the Caribbean.
Arcos Dorados’ expected earnings growth rate for the current year is 13%. The Zacks Consensus Estimate for current-year earnings has improved 2.6% over the past 90 days. Currently, ARCO has a Zacks Rank #2.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Carrols Restaurant Group, Inc. (TAST) : Free Stock Analysis Report
Arcos Dorados Holdings Inc. (ARCO) : Free Stock Analysis Report
Kura Sushi USA, Inc. (KRUS) : Free Stock Analysis Report
First Watch Restaurant Group, Inc. (FWRG) : Free Stock Analysis Report
