4 restaurant stocks to buy if sales continue to rise

RRising costs have been a concern, but the retail sector does not appear to have been affected much. As millions of Americans continue to spend more, the restaurant industry is rapidly recovering after nearly two years from when sales began to plunge due to the COVID-19 pandemic.

Sales at bars and restaurants rose in April, indicating people are willing to spend despite rising costs. Additionally, restaurants have started hiring aggressively in recent months, indicating that the industry is returning to pre-pandemic levels. Given this scenario, actions like BBQ Holdings, Inc. A BARBECUE, Arcos Dorados Holdings Inc. ARCO, The ONE Hospitality Group, Inc.. STKS and Bloomin’Brands, Inc. BLMN should perform well in the short term.

Increase in restaurant sales

The Commerce Department said May 17 that sales at U.S. bars and restaurants rose 2% month-over-month in April. Year over year, restaurant sales jumped 19.8%. The jump comes as a growing number of people have continued to dine in restaurants, following the decline in new COVID-19 cases in recent months.

April’s gains come as the broader retail sector continued to perform well despite multiple challenges, including inflationary pressures and the supply chain crisis. Retail sales rose 0.9% in April.

Restaurants and bars played an important role in the growth of overall retail sales. People have reduced their spending on services during the pandemic, opting instead to spend more on basics. Also, due to the COVID-induced lockdown, they didn’t have much of an option in terms of spending on services.

However, things are finally changing and people have started spending on services, which helps boost restaurant sales.

The restaurant industry is poised to grow

The restaurant industry has become one of the biggest casualties of the COVID-19 pandemic as footfall has continued to decline with most people staying indoors for all of 2020 and the major part of 2021. However, the situation now appears to be improving with businesses and industries resuming operations. normal operations.

The industry started to get back on its feet last year, but several variants of COVID-19 like Delta and Omicron have hampered sales from time to time as hospitalizations have increased.

However, things started to change this year. People come out with more confidence after taking the vaccine. This led to a further increase in spending on services such as travel, hotels and restaurants.

Yet challenges abound, with rising costs being one of the most significant.

That said, the industry appears confident of rebounding as hiring is on the rise again to cope with the pressure of soaring sales. The Labor Department said May 6 that the United States added 428,000 nonfarm payrolls in April, beating expectations of 400,000.

Of these, 44,000 jobs were added to the restaurant industry. This demonstrates not only the strength of the economy, but also the confidence of restaurateurs, who are increasing their hiring to meet customer demand.

Additionally, a report from the National Restaurant Association shows that sales in bars and restaurants in the United States will be much better in 2022 than last year. The report says restaurant sales will hit $898 billion this year and return to pre-pandemic levels.

Our choices

Given the situation, the ideal would be to invest in restaurant stocks. We shortlisted four restaurant stocks, each carrying a Zacks rank of No. 1 (Strong Buy) or 2 (Buy). You can see the full list of today’s Zacks #1 Rank stocks here.

BBQ Holdings, Inc. operates and franchises barbecue restaurants and blues clubs. BBQ currently has locations and franchise locations in Minnesota, Wisconsin, Illinois, Iowa, Nebraska, Utah, Maryland and Virginia and has signed development agreements for additional franchise locations. The menu at BBQ Holdings features award-winning grilled and grilled meats, an extensive selection of unique salads, sides, sandwiches and desserts.

BBQ Holdings’ forecast earnings growth rate for the current year is 67.6%. The Zacks consensus estimate for current-year earnings has improved 0.8% over the past 60 days. BBQ wears a No. 2 Zacks rank.

Arcos Dorados Holdings Inc. operates as a franchisee of McDonald’s, with its operations spread across Brazil; North Latin America division; South Latin America and Caribbean Division. ARCO also operates quick service restaurants in Latin America and the Caribbean.

Arcos Dorados’ expected profit growth rate for the current year is 66.7%. The Zacks consensus estimate for current-year earnings has improved 8.1% over the past 60 days. ARCO has a #2 Zacks rank.

The ONE Hospitality Group, Inc.. operates as a host society. STKS develops, manages and operates a portfolio of high-energy restaurants, lounges and bars. The ONE Group Hospitality also provides catering hospitality solutions. STKS’ main restaurant brand is STK, which is a steakhouse concept with locations in metropolitan cities across the United States and in London.

ONE Group Hospitality’s expected profit growth rate for the current year is 27.1%. The Zacks consensus estimate for current-year earnings has improved 1.4% over the past 60 days. STKS has a #2 Zacks rank.

Bloomin’Brands, Inc. is a casual dining company with a portfolio of differentiated dining concepts. BLMN has five concepts: Outback Steakhouse, Carrabba’s Italian Grill, Bonefish Grill, Fleming’s Prime Steakhouse and Wine Bar and Roy’s. Bloomin’ Brands offers its products and services through company-owned and franchised locations in the United States and abroad.

Bloomin’ Brands’ expected earnings growth rate for next year is 13.6%. The Zacks consensus estimate for current-year earnings has improved 3.7% over the past 60 days. BLMN has a #2 Zacks rank.

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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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