5 Top Restaurant Stocks for Appetizing Returns in 2024
The restaurant industry had to bear many headwinds amid the pandemic as most Americans favored eating at home. However, restaurant owners saw a revival in their business this year, aided by easing inflationary pressure, a strong labor market, an uptick in consumer confidence and fewer supply-chain issues.
During the earlier part of 2023, inflationary pressures led to an increase in prices of chicken and dairy, which compelled restaurant operators to hike their menu prices. But with inflation ebbing in recent times, the burden of price pressure seems to have retreated for restaurant owners, helping them recover losses to some degree. The consumer price index did increase 3.1% year over year in November, but that’s less than the annual rate of 3.2% in October, per the Labor Department. Also, it’s way below the 40-year high of 9.1% in 2022.
The labor market, incidentally, continues to be buoyant and quelled expectations of an impending recession, which certainly bodes well for the restaurant industry. After all, if economic growth is hampered, consumers’ propensity to spend will decline and adversely impact sales at restaurants. Talking about the labor market, the jobless rate at present continues to hover at a record low level, while wages are increasing at a faster pace than inflation.
Consumers’ expectations about future business conditions have also improved, aided by a solid labor market. And with consumers’ confidence picking up, it’s more likely that they will open up their purses, a trend that benefits restaurants. The consumer confidence index ticked up to 102.0 in November from October’s downwardly revised 99.1, per the Conference Board.
Supply-chain blockages for restaurant owners have started to show signs of easing, helping the delivery time to improve substantially. Freight rates, too, have declined significantly, and same-store sales have picked up, helping restaurant owners see margins return to normalcy. At the same time, restaurant owners’ innovative strategies to cater to cost-conscious customers, mining customer data, and implementing technologies are boosting their profit margins.
Labor shortages for quite some time have been a drag on the restaurant industry. However, with job openings declining in the restaurant industry this year compared to the prior year, the labor shortage issue seems to have been addressed. To put things into perspective, the job openings rate in the restaurant industry fell from 8.2% in 2022 to 6.7% in August 2023.
Thus, banking on these slew of positive factors, the restaurant industry is well-poised to grow in 2024. Merger and acquisition activities have also picked up in the restaurant industry, which points toward the underlying strength as well.
This calls for investing in sound stocks such as FAT Brands FAT, Brinker International EAT, Shake Shack SHAK, Carrols Restaurant Group TAST and Wingstop WING that can make the most of the encouraging trends in the restaurant industry. These stocks flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
FAT Brands is a multi-brand restaurant franchising company. FAT currently has a Zacks Rank #2.
The Zacks Consensus Estimate for its current-year earnings has moved up 3.1% over the past 60 days. FAT’s expected earnings growth rate for next year is 27.4%.
Brinker International operates, develops and franchises various restaurants under Chili’s Grill & Bar. EAT currently has a Zacks Rank #1.
The Zacks Consensus Estimate for its current-year earnings has moved up 8.2% over the past 60 days. EAT’s expected earnings growth rate for next year is 9.5%.
Shake Shack is a New York-based fast food hamburger restaurant chain. SHAK currently has a Zacks Rank #2.
The Zacks Consensus Estimate for its current-year earnings has moved up 41.7% over the past 60 days. SHAK’s expected earnings growth rate for next year is 35.3%.
Carrols Restaurant is the largest BURGER KING franchisee in the United States. The company currently has a Zacks Rank #1.
The Zacks Consensus Estimate for its current-year earnings has moved up 29.7% over the past 60 days. TAST’s expected earnings growth rate for next year is 8.3%.
Wingstop franchises and operates restaurants. WING currently has a Zacks Rank #1.
The Zacks Consensus Estimate for its current-year earnings has moved up 9.1% over the past 60 days. WING’s expected earnings growth rate for next year is 17.5%.
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Brinker International, Inc. (EAT) : Free Stock Analysis Report
Carrols Restaurant Group, Inc. (TAST) : Free Stock Analysis Report
Shake Shack, Inc. (SHAK) : Free Stock Analysis Report
Wingstop Inc. (WING) : Free Stock Analysis Report
FAT Brands Inc. (FAT) : Free Stock Analysis Report
