5 solid stocks to buy

The pandemic has left the restaurant industry in poor shape, with most businesses still struggling to get back on their feet. The early months of the pandemic saw outdoor dining come to a halt as many restaurants rolled down their shutters. This has seen revenue take a huge hit for most of 2020.

However, in their first sign of a rebound, restaurant sales finally started to pick up as people spent more in March. Additionally, hiring in bars and restaurants is on the rise after a long stretch, giving further indication of the rebound in the industry.

Restaurant sales jump in March

According to U.S. Census data released on April 15, restaurant sales jumped 36% in March year-on-year as people spent more freely with the second round of stimulus checks coming their way.

Food services and drinking places sales totaled $61.2 billion in March, up 13.4% month-over-month. Although sales are still below pre-pandemic levels, the surge in March is a major relief given that the industry was on the brink of collapse until some time ago.

Exactly a year ago, the coronavirus-induced lockdown forced almost every industry and business to close. However, the restaurant industry struggled to get out of the funke even after the economy reopened as people were skeptical of outdoor dining. Also, due to huge job losses, people didn’t spend much during this period, except for a few months after the first round of stimulus.

In March 2021, sales surged again as the second round of stimulus checks began to hit millions.

The restaurant industry is poised to grow

Although the second round of stimulus checks played a major role in boosting sales last month, the good thing is that the industry is gradually getting back on its feet. March sales are slightly lower than the $62.7 billion sales recorded in March 2019.

According to an article by Restaurant Business Online, citing a report by the National Restaurant Association, American restaurants are on track for a steady recovery after a 19.2% decline in 2020, which was also the most difficult year for industry. Additionally, restaurants have finally started hiring more, which also stalled during the peak months of the pandemic.

According to the Department of Labor, restaurants and bars hired 286,000 employees in February. March figures are also expected to rise, analysts said. In addition, the vaccination campaign is in full swing. President Joe Biden recently announced that there are enough vaccines for every American adult to receive by the end of May. It can further give people the confidence to dine out, thus boosting sales.

Our choices

Rising sales and hiring are a clear sign that the restaurant industry is on the right path to recovery. Moreover, the new wave of stimulus checks coupled with the vaccination campaign should strengthen purchasing power in the days to come. In this scenario, restaurant stocks should look attractive to investors.

Darden Restaurants, Inc. DRI is one of the largest casual dining restaurant operators in the world. The company is present in the United States and Canada with more than 1,700 restaurants.

The company’s forecasted earnings growth rate for next year is 26.5%. The Zacks consensus estimate for current-year earnings has improved 22.2% over the past 60 days. Darden Restaurants sports a Zacks #1 (Strong Buy) rating. You can see the full list of today’s Zacks #1 Rank stocks here.

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 represent nearly 70% of the total system.

The company’s expected profit growth rate for the current year is 38.1%. The Zacks consensus estimate for current-year earnings has improved 13.6% over the past 60 days. Jack In The Box wears a Zacks Rank #2 (Buy).

Starbucks Corporation SBUX is the world’s leading specialty coffee roaster and retailer. In addition to fresh, richly brewed coffees, Starbucks’ offerings include many free food items and a selection of premium teas and other beverages, sold primarily through the company’s retail stores.

The company’s expected earnings growth rate for next year is over 100%. The Zacks consensus estimate for current-year earnings has improved 0.4% over the past 60 days. Starbucks has a #2 Zacks rank.

Brands Yum, Inc. YUM is the world leader in multi-brand and offers consumers more choice and convenience in a single point of sale. The company currently reports across four segments – KFC (44.8% of total Q1 2020 revenue), Pizza Hut (18.6%), Taco Bell (35.9%) and Habit Burger Grill (0.7%).

The company’s forecasted earnings growth rate for next year is 8.3%. The Zacks consensus estimate for current-year revenue has improved 1% over the past 60 days. Yum Brands wears a #2 Zacks rank.

Chuys Holdings, Inc. CHUY owns and operates full-service restaurants serving a distinct menu of authentic Mexican dishes. The company offers a menu that includes appetizers, soups and salads, tacos, burritos, enchiladas, fajitas and combination dishes.

The company’s forecasted earnings growth rate for next year is 34.5%. The Zacks consensus estimate for current-year earnings has improved 9.7% over the past 60 days. Chuys Holdings has a #2 Zacks rank.

Zacks Top 10 Stocks for 2021

In addition to the stocks outlined above, would you like to know our top 10 buy and hold tickers for all of 2021?

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