The Zacks Analyst Blog Highlights Domino's, McDonald's, Wingstop, Dave & Buster's and Jack in the Box
For Immediate Release
Chicago, IL – August 8, 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: Domino's Pizza Inc. DPZ, McDonald's Corp. MCD, Wingstop Inc. WING, Dave & Buster's Entertainment Inc. PLAY and Jack in the Box Inc. JACK.
Here are highlights from Monday’s Analyst Blog:
Top 5 Restaurant Stocks to Enhance Your Portfolio
The U.S. restaurant businesses continue to thrive in 2023 after an impressive turnaround last year. This industry suffered major jolts during the coronavirus outbreak due to lockdowns and other restrictive norms to maintain social distancing. Sales at U.S. restaurants have not been impacted much despite severe inflationary pressure.
Strong Restaurant Sales in June
The Department of Commerce reported that sales at U.S. bars and restaurants came in at $88.9 billion in June, remaining the same as the upwardly revised $1 billion sales in the previous month. Year over year, spending on restaurants and bars climbed 8.4% in June.
The restaurant space is the main driver of growth for overall retail sales. Steady consumer spending continued in June despite worries that the economy may enter a recession this year. Although higher interest rates made customers concerned, they spent lavishly at restaurants and bars.
The industry body, the National Restaurant Association (NRA) stated “Despite the booming popularity of off-premises restaurant meals and snacks in recent years, pent-up demand for in-restaurant experiences — socialization, celebration, and culinary exploration — is strong, with 70% of respondents noting customer desire to gather on-premises.”
Within the retail sector, the Zacks Defined Restaurant Industry is currently placed in the top 18% of all industries with a year-to-date return of 9.9%.
Innovative Measures
The restaurant industry is gradually witnessing improving sales. The improvement can be attributed to the enhancement in fundamentals such as modifications in business processes, staffing, floor plans and technology.
Restaurant operators’ focus on digital innovation, their sales-building initiatives, and cost- saving efforts have been acting as the major catalysts. With the growing influence of the Internet, digital innovation has become the need of the hour. Big restaurant chains are constantly partnering with delivery channels and digital platforms to drive incremental sales.
The restaurant industry is consistently gaining from the spike in off-premise sales, which primarily include delivery, takeout, drive-thru, catering, meal kits and off-site options, such as kiosks and food trucks, owing to the coronavirus pandemic. Per the NRA, more than 60% of restaurant foods are consumed off-premise.
By 2025, off-premise is likely to account for approximately 80% of the industry's growth. The idea of providing off-premise offerings along with a connected curbside service is steadily garnering positive customer feedback.
Our Top Picks
We have narrowed our search to five restaurant stocks that have strong growth potential for the rest of 2023. These stocks have seen positive earnings estimate revision in the last 30 days. Each of our picks carries either a Zacks Rank # 1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Domino's Pizza Inc. is benefiting from a solid digital ordering system and higher global retail sales. This and DPZ’s focus on menu additions bode well. Although the initiative paves the path for increased costs in delivery orders, attributes such as variety, great taste and competitive pricing are likely to have helped DPZ achieve balanced growth across tickets and orders in the long term.
Zacks Rank #1 Domino's Pizza has an expected revenue and earnings growth rate of 0.1% and 9.6%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.4% over the last 30 days.
McDonald's Corp. continues to impress investors with robust comps growth. MCD’s increased focus on menu innovation and loyalty program expansion is commendable. MCD is also making every effort to drive growth in international markets. Robust digitalization is likely to help McDonald's drive long-term growth and capture market share. MCD plans to open more than 1,900 restaurants globally in 2023.
Zacks Rank #2 McDonald’s has an expected revenue and earnings growth rate of 9.4% and 13.4%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.1% over the last seven days.
Wingstop Inc. franchises and operates restaurants. WING’s operating segment consists of the Franchise and Company segments. WING offers classic wings, boneless wings, and tenders that are cooked-to-order, and hand-sauced-and-tossed in various flavors.
Zacks Rank #2 Wingstop has an expected revenue and earnings growth rate of 21.3% and 17.3%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.5% over the last seven days.
Dave & Buster's Entertainment Inc. is benefitting from robust main events and new noncomparable store sales. Also, expansion efforts and digital innovations bode well. PLAY anticipates capitalizing on pent-up demand by focusing on marketing and programming efforts through digital channels. Focusing on international expansion, PLAY signed two franchise agreements for opening new stores in India and Australia.
Zacks Rank #1 Dave & Buster's Entertainment has an expected revenue and earnings growth rate of 17% and 29%, respectively, for the current year (ending January 2024). The Zacks Consensus Estimate for current-year earnings has improved 0.8% over the last 30 days.
Jack in the Box Inc. is benefiting from robust same-store sales growth, increased menu pricing and mix along with strong contributions from Del Taco. Also, store expansion initiatives, menu innovation and loyalty programs bode well. Moreover, JACK’s use of digital platforms to enhance overall guest experiences and customer satisfaction adds to the uptrend.
Given the unit expansion efforts coupled with an emphasis on Del Yeah! Rewards program, JACK anticipates the initiatives to better target guests and drive average spending and frequency in the upcoming periods.
Zacks Rank #2 Jack in the Box has an expected revenue and earnings growth rate of 15.9% and 4.5%, respectively, for the current year (ending September 2023). The Zacks Consensus Estimate for current-year earnings has improved 0.2% over the last 30 days.
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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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