The Zacks Analyst Blog Highlights Arcos Dorados, Yum China, Chipotle Mexican Grill and El Pollo Loco
For Immediate Release
Chicago, IL – October 6, 2023 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Arcos Dorados Holdings Inc. ARCO, Yum China Holdings, Inc. YUMC, Chipotle Mexican Grill, Inc. CMG and El Pollo Loco Holdings, Inc. LOCO.
Here are highlights from Thursday’s Analyst Blog:
4 Restaurant Stocks to Watch as Sales Continue to Soar
The U.S. restaurant industry staged a solid rebound last year despite inflationary pressures as more people ate out. Restaurants had suffered during the peak of the pandemic in 2020 and were trying to make a turnaround, which didn’t happen for almost two years.
However, sales have been steadily increasing over the past year. High commodity prices have compelled consumers to spend cautiously, but that hasn’t stopped them from shelling out at bars and restaurants.
Restaurant Sales Jump
Sales at bars and restaurants grew 0.3% in August, totaling $90.8 billion after increasing $90.5 billion in July, according to the Commerce Department’s report. On a year-over-year basis, sales at restaurants and bars jumped a solid 8.2% in August.
The report comes as overall retail sales grew 0.6% in August. The retail sector has been under tremendous pressure due to multi-decade high inflation. Consumers are cutting down on spending but that hasn’t stopped them from spending at bars and restaurants.
In fact, restaurants, the only service sector in the monthly retail sales report, have been largely responsible for driving retail sales over the past few months.
In the retail sector, the Zacks Defined Restaurant Industry is presently ranked in the upper 29% among all industries, boasting a year-to-date return of 2.7%.
Understandably, the restaurant industry is roaring back to normal. Also, inflationary pressures have eased a lot over the past year, thanks to the Federal Reserve’s aggressive interest rate hike campaign.
The Federal Reserve has hiked rates by 525 basis points over the past 18 months and has seen a sharp decline in inflation from its peak of 9.1% in June 2022. The Fed has also signaled the ending of its monetary tightening campaign by the end of this year.
Also, rate cuts will come into effect in 2024, which bodes well for the restaurant industry as lower borrowing costs will allow people to spend more freely.
Most restaurant operators are benefiting from adopting ghost or virtual kitchens. The concept of offering off-premise options and establishing a streamlined curbside service is receiving positive feedback from customers.
Stocks in Focus
We’ve chosen four restaurant stocks that are expected to gain amid rising sales despite the challenges of inflation. These include Arcos Dorados Holdings Inc., Yum China Holdings, Inc., Chipotle Mexican Grill, Inc. and El Pollo Loco Holdings, Inc.
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 60 days. Currently, ARCO has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Yum China Holdings, Inc. operates both company-owned and franchised restaurants. YUMC’s brands include The KFC, Pizza Hut and Taco Bell. The company also owns East Dawning, Little Sheep, and COFFii & JOY.
Yum China Holdings’ expected earnings growth rate for the current year is 15.1%. The Zacks Consensus Estimate for current-year earnings has improved 0.4% over the past 60 days. YUMC currently has a Zacks Rank #3 (Hold).
Chipotle Mexican Grill, Inc., together with its subsidiaries, operates quick-casual and fresh Mexican food restaurant chains. CMG offers a focused menu of burritos, tacos, burrito bowls (a burrito without the tortilla) and salads.
Chipotle Mexican Grill’s expected earnings growth rate for the current year is 31.2%. The Zacks Consensus Estimate for current-year earnings has improved more than 0.3% over the past 60 days. CMG currently carries a Zacks Rank #3.
El Pollo Loco Holdings, Inc., through its subsidiary, develops, franchises, licenses and operates quick-service restaurants under the name El Pollo Loco. LOCO specializes in flame-grilled chicken in a variety of contemporary Mexican-influenced entrees, including specialty chicken burritos, chicken quesadillas, chicken tortilla soup, Pollo Bowls and Pollo Salads.
El Pollo Loco’s expected earnings growth rate for the current year is 25.9%. The Zacks Consensus Estimate for current-year earnings has improved more than 1.4% over the past 60 days. LOCO currently carries a Zacks Rank #2.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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Chipotle Mexican Grill, Inc. (CMG) : Free Stock Analysis Report
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