Top 6 Restaurant Inventories To Benefit From The Grand Reopening


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The past week has been a disappointment for Wall Street, mainly due to concerns about looming inflation. The three major stock indexes – the Dow, S&P 500 and Nasdaq Composite – fell 1.1%, 1.4% and 2.3% respectively, marking their worst weekly performance since February 26.

Moreover, as for the economic data, retail sales in April were flat compared to March, missing the consensus estimate of a 1.1% increase. However, one retail segment – restaurants and bars – performed quite well in April. This industry should experience much better performance in the near future, thanks to the great reopening of the US economy.

April strong for restaurants and bars

On May 14, the Commerce Department announced that retail sales were flat compared to March in April. However, March sales were revised up to a 10.7% jump from February, from a 9.8% increase reported earlier. Notably, in absolute terms, retail sales of $ 619.9 billion in April were indeed a very high number.

Importantly, unlike March, when the surge in retail sales was widespread, only two categories – restaurants and bars and car dealerships – recorded notable gains of 3% and 2.9%, respectively, in April.

According to a study by the National Restaurant Association, the industry body, the latest Census Bureau report found that the restaurant and bar industry generated $ 64.9 billion in sales in April on a seasonally adjusted basis. This was the third strong increase in total sales in the past four months.

However, despite this strong performance, April sales of this industry remained $ 1.3 billion or 2% below the level before the pandemic in February 2020. According to the industry body, sales This industry’s totals between March 2020 and April 2021 showed a whopping its own estimate.

Additionally, the National Restaurant Association reported that the restaurant and bar industry added 187,000 people in April on a seasonally adjusted basis, marking the fourth consecutive month of payroll growth.

Despite this impressive performance, the total industry workforce is still 1.7 million below the pre-pandemic level. According to the industry body, 84% of restaurant and bar owners said “their workforce was below what they would normally be in the absence of COVID-19.”

Therefore, both in terms of total sales and workforce recruitment, the restaurant and bar industry has enormous untapped potential.

Double-edged growth engines

The Biden administration’s priorities for national COVID-19 vaccination and pandemic mitigation are the main growth drivers for the restaurant and bar industry.

First, on May 13, Dr Rochelle Walensky – director of the Centers for Disease Control and Prevention – said fully vaccinated Americans did not need to wear a mask or stay six feet from others in most. contexts, whether outdoors or indoors, excluding travel. .

On May 4, President Joe Biden announced that his administration’s latest goal was to ensure that 70% of U.S. adults receive at least one dose of a COVID-19 vaccine and that 160 million adults are fully immunized. by July 4.

Second, several economists and financial experts have warned that the phasing out of consumer stimulus packages will negatively impact retail sales in the future. However, others have pointed out that Americans have a whopping $ 2.3 trillion in excess or forced savings from their downtime.

Suppressed massive demand coupled with unprecedented personal savings are expected to boost consumer spending in the near future. This is evident from the 10.7% increase in consumer spending in the first quarter of 2021. Consumer spending is notably the largest component of US GDP.

Therefore, a faster-than-expected reopening of the economy, easing restrictions, and strong pent-up demand and savings are expected to act as positive short-term catalysts for the restaurant and bar industry.

Our top picks

We narrowed down our search to six restaurant stocks that outperformed the benchmark S&P 500 in April. These stocks have strong growth potential for the remainder of 2021 and have seen strong earnings estimate revisions over the past 30 days. Each of our choices carries either a Zacks rank # 1 (strong buy) or 2 (buy). You can see The full list of current Zacks # 1 Rank stocks here.

The graph below shows the price evolution of our six choices in April 2021.

Bloomin ‘Brands Inc. BLMN owns and operates casual, upscale and fine dining restaurants in the United States and around the world. It operates through two segments, American and International. This Zacks Rank # 1 company has an expected profit growth rate of over 100% for the current year. Zacks’ consensus estimate for the current year has improved 63.5% over the past 30 days.

Texas Roadhouse Inc. TXRH operates casual restaurants in the United States and around the world. It operates and franchises the 33 Texas Roadhouse and Bubba restaurants. This Zacks Rank # 1 company has an expected profit growth rate of over 100% for the current year. Zacks’ consensus estimate for the current year has improved 29.9% over the past 30 days.

YUM! Brands Inc. YUM develops, operates and franchises quick service restaurants around the world. It operates in three segments: the KFC division, the Pizza Hut division and the Taco Bell division. This Zacks Rank # 2 company has an expected profit growth rate of 13.81% for the current year. Zacks’ consensus estimate for the current year has improved 5.4% over the past 30 days.

Chuy’s Holdings Inc. CHUY owns and operates full-service restaurants serving a distinct menu of authentic Mexican fare in Texas and 19 states in the Southeast and Midwestern United States. This Zacks Rank # 1 company has an expected earnings growth rate of 72.6% for the current year. Zacks’ consensus estimate for the current year has improved 28.3% over the past 30 days.

Jack in the Box Inc. JACK is a restaurant company that operates and franchises Jack in the Box quick service restaurants, and is one of the nation’s largest burger chains. This Zacks Rank # 2 company has an expected profit growth rate of 42.6% for the current year (ending September 2021). Zacks’ consensus estimate for current year earnings has improved 3% in the past 7 days.

Dine Brands Global Inc. DIN owns, franchises, operates and leases full service restaurants in the United States and around the world. This Zacks Rank # 1 company has an expected profit growth rate of over 100% for the current year. Zacks’ consensus estimate for the current year has improved by 39.8% over the past 30 days.

Zacks names “Best Single Pick to Double”

Among thousands of stocks, 5 Zacks experts each chose their favorite to skyrocket + 100% or more in the coming months. Of these 5, research director Sheraz Mian chooses one to have the most explosive advantage of all.

You’ve known this company from its past glory days, but few people expect it to be ready for a monster turnaround. Fresh from a successful repositioning and flush with A-List celebrity endorsements, it could rival or surpass other recent Zacks stocks that are expected to double as Boston Beer Company which climbed + 143.0% in just a bit. more than 9 months and Nvidia which exploded by + 175.9% in one year.

Free: see our best stocks and 4 finalists >>

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Jack In The Box Inc. (JACK): Free Stock Analysis Report

DINE BRANDS GLOBAL, INC. (DIN): Free Stock Analysis Report

Texas Roadhouse, Inc. (TXRH): Free Stock Analysis Report

Yum Brands, Inc. (YUM): Free Stock Analysis Report

Chuys Holdings, Inc. (CHUY): Free Stock Analysis Report

Bloomin Brands, Inc. (BLMN): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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