Yahoo Finance 4 Solid Stocks to Buy on a Steady Rise in Restaurant Sales
The retail sector has been severely hit as higher commodity prices have been compelling consumers to cut down on spending. However, things seem to be looking up as sales are showing signs of a rebound. Retail sales rebounded in April, aided by steady consumer spending.
One of the major reasons behind April’s jump was higher spending at restaurants and bars. Although the retail sector has been taking a beating over the past year, sales at U.S. restaurants haven’t been impacted much despite inflationary pressure.
In fact, sales at restaurants have been steadily growing ever since the economy reopened after the COVID-induced lockdown. Given this situation, stocks like Wingstop Inc. WING, BJ's Restaurants, Inc. BJRI, Chipotle Mexican Grill, Inc. CMG and Chuy's Holdings, Inc. CHUY are likely to benefit in the near term.
Restaurant Sales Jump
Sales at U.S. bars and restaurants increased 0.6% in April, the Commerce Department said on May 16. This came despite inflationary pressure. Food prices have been soaring but consumer spending has been steady, which has been boosting sales. Going out to eat is a major sign of household finances, according to economists.
The report comes as retail sales increased 0.4% in April, rebounding from a 0.7% decline in March. Core retail sales, which exclude volatile energy and food prices, increased 0.6% in April.
Steady consumer spending continued in April despite worries that the economy will enter a recession this year. Although higher interest rates have customers concerned, they are nonetheless spending lavishly at restaurants and bars.
This is mostly due to a robust labor market. The U.S. economy has been making significant job additions almost every month. In April, nonfarm payrolls increased by 253,000, which came in above analysts’ expectations of a rise of 180,000.
This coincides with an increase in wages, which is improving consumers’ purchasing power. Inflation has also begun to show signs of cooling, although it remains elevated and significantly higher than the Fed's target rate of 2%.
The Consumer Price Index (CPI) for April rose 4.9% year over year compared with 5% in March. This is the lowest annual rate in the past two years.
The National Restaurant Association (NRA) in its latest report said that the restaurant industry is poised to grow at a fast pace in 2023. The NRA projects restaurant sales to reach $997 billion in 2023, up 11% from the 2022 estimates of $898 billion.
This is mainly because NRA believes the industry will return to normalcy following the COVID-19 impact on businesses. Also, supply chain disruptions are expected to ease.
Our Choices
Given this situation, it would be ideal to invest in these four restaurant stocks.
Wingstop Inc. franchises and operates restaurants. WING’s operating segment consists of the Franchise and Company segments. Wingstop offers cooked-to-order, hand-sauced and tossed chicken wings.
Wingstop’sexpected earnings growth rate for the next year is 13%. The Zacks Consensus Estimate for current-year earnings has improved 10% over the past 60 days. WING currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
BJ's Restaurants, Inc. owns and operates a chain of high-end casual dining restaurants in the United States. BJRI’s restaurants operate as BJ’s Restaurant & Brewery /BJ’s Restaurant & Brewhouse and/ or BJ’s Pizza & Grill and or BJ’s Grill. The menu offers a wide range of dining options, including everyday lunch and dinner, special occasions and late-night business.
BJ's Restaurants’ expected earnings growth rate for the next year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 7.9% over the past 60 days. Presently, BJRI has a Zacks Rank #2 (Buy).
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 33.4%. The Zacks Consensus Estimate for current-year earnings has improved more than 5.7% over the past 60 days. CMG currently sports a Zacks Rank #1.
Chuy's Holdings, Inc. owns and operates full-service restaurants serving a distinct menu of authentic Mexican food. CHUY offers a menu, which includes appetizers, soups and salads, tacos, burritos, enchiladas, fajitas and combination platters. Chuy's Holdings operates chains throughout Texas, Alabama, Indiana, Kentucky, and Tennessee. Chuy's Holdings is headquartered in Austin, TX.
Chuy's Holdings’ expected earnings growth rate for the current year is 23.4%. The Zacks Consensus Estimate for current-year earnings has improved 3.7% over the past 60 days. CHUY presently carries a Zacks Rank #2.
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BJ's Restaurants, Inc. (BJRI) : Free Stock Analysis Report
Chipotle Mexican Grill, Inc. (CMG) : Free Stock Analysis Report
Chuy's Holdings, Inc. (CHUY) : Free Stock Analysis Report
Wingstop Inc. (WING) : Free Stock Analysis Report
