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Restaurant Industry Poised to Grow in 2021: 5 Stocks to Watch

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One of the biggest casualties of the COVID-19 pandemic has been the restaurant industry. However, according to a new report by the National Restaurant Association, the restaurant industry will bounce back and grow further in 2021.

The restaurant industry has been struggling to get back on its feet as fears of coronavirus are still keeping millions away from visiting eating and drinking places.

Restaurant Industry to Grow in 2021

According to a Restaurant Business Online article citing a report by the National Restaurant Association, the U.S. restaurant industry will bounce back in 2021. The report says that sales at restaurants and drinking places will increase 10.2% in 2021 to $548.3 billion as many people will be dining out after being confined to their homes for almost a year due to the pandemic. 

The growth prediction comes after sales at eating and drinking places in the United States declined 19.2% in 2020, which was the most challenging year for the industry. Restaurants offering full services will witness slightly stronger sales of 10.7% nationally. Those offering table service are likely to see a rise of 7.6%, the real growth that, at times, is equated with traffic gains.

Besides, the NRA projects sales at limited-service restaurants to grow 8%, while there will be an increase of 4% in real revenues in 2021. Sales at bars and taverns are projected to 80.2% in nominal terms in 2021.

Industry Trying to Get Back on Its Feet

The initial months of the pandemic saw restaurants and bars completely closed, with almost no sales as businesses came almost to a standstill. The industry started to revive following the reopening of the economy but sales continued to take a hit though with thin traffic. This left the industry bleeding and recorded its worst year in terms of sales.

However, now that the vaccination drive is in full swing, people are likely to get back their confidence in visiting restaurants and bars. Moreover, those workers who were furloughed have also started going back to work.

Also, the majority of restaurants are now focusing on drive-thru facilities and online delivery to stay afloat in the race. Hiring too has been on the rise at restaurants lately, which is another good sign that the industry is trying to bounce back.

Stocks to Watch

Given this scenario, restaurant stocks should appear rather appealing to investors.

Jack In The Box Inc. JACK operates and franchises through Jack In The Box quick-service restaurants, and is one of the nation’s largest hamburger chains. Based on the number of restaurants, the company’s top 10 markets comprise nearly 70% of the total system.

The company’s expected earnings growth rate for the current year is 20.4%. The Zacks Consensus Estimate for current-year earnings has improved 0.2% over the past 60 days. Jack In The Box carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.

Del Taco Restaurants, Inc. TACO is the second-largest Mexican-American QSR chain by units in the United States, serving more than three million guests each week.

The company’s expected earnings growth rate for next year is 48.3%. Its shares have gained 10.5% in the past 30 days. Del Taco carries a Zacks Rank #3.

Chipotle Mexican Grill, Inc. CMG offers a focused menu of burritos, tacos, burrito bowls and salads. Chipotle restaurants feature free-range, hormone-free pork, natural chicken and other meat products cooked through traditional methods and served in a unique atmosphere. 

The company’s expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 6.2% over the past 60 days. Chipotle Mexican Grill carries a Zacks Rank #3.

Brinker International, Inc. EAT primarily owns, operates, develops and franchises various restaurants under Chili’s Grill & Bar (Chili’s) and Maggiano’s Little Italy (Maggiano’s) brands. 

The company’s expected earnings growth rate for the current year is 50.3%. The Zacks Consensus Estimate for current-year earnings has improved 2.8% over the past 30 days. Brinker International has a Zacks Rank #3.

McDonald’s Corporation MCD is a leading fast-food chain that currently operates roughly 38,000 restaurants in more than 100 countries. The company mainly operates and franchises quick-service restaurants (QSRs) under the McDonald’s brand. 

The company’s expected earnings growth rate for next year is 38.5%. The Zacks Consensus Estimate for current-year earnings has improved 1.6% over the past 60 days. McDonald’s holds a Zacks Rank #3.

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