Benzinga - by Zacks, Benzinga Contributor.
The U.S. restaurant industry is putting up a great show amid price pressures. Sales are soaring as an increasing number of Americans are spending freely on dining out.
According to the Commerce Department, sales at U.S. food and drinking places totaled $98.1 billion in March, up 0.4% month over month after increasing 0.5% in February. Sales at U.S. restaurants rose a solid 6.6% year over year in March, while sales from January through March totaled $27.1 billion.
The retail sector has struggled for months owing to the price inflationary pressures and is still striving to get back on its feet.
According to the Commerce Department, retail sales rose 0.7% in March. The Federal Reserve kept interest rates unchanged at the current range of 5.25-5.5% after hiking interest rates by 525 basis points since March 2022.
Moreover, it hasn't yet indicated the time for the first rate cut, which is making consumers worry. However, Americans are not hesitant about spending on food despite higher borrowing rates and prices.
The upward trend in restaurant sales is being driven by robust consumer spending and an increase in personal income. In March, consumer spending increased 0.8%, while personal income rose 0.5% month over month.
According to the National Restaurant Association's annual State of the Industry Report, restaurant sales are anticipated to reach a record $1.1 trillion in 2024. This projection represents a significant 10.3% increase from the initial sales forecast for 2023, thereby surpassing the trillion-dollar milestone in total industry revenues for the first time.
Our Picks We have narrowed our search to four restaurant stocks such as CAVA Group, Inc. (NYSE: CAVA), Chipotle Mexican Grill, Inc. (NYSE: CMG), Brinker International, Inc. (NYSE: EAT) and Wingstop Inc. (NASDAQ: WING) that have strong potential for 2024.
These stocks have seen positive earnings estimate revisions in the last 60 days. Each of the stocks has a Zacks Rank #1 (Strong Buy) or 2 (Buy).
CAVA Group, Inc. is a category-defining Mediterranean fast-casual restaurant brand, which brings heart, health and humanity to food. CAVA is based in Washington.
CAVA Group's expected earnings growth rate for the current year is 22.8%. The Zacks Consensus Estimate for current-year earnings has improved 8.7% over the past 60 days. CAVA currently has a Zacks Rank #2.
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 22.8%. The Zacks Consensus Estimate for current-year earnings has improved 3.8% over the past 60 days. CMG currently carries a Zacks Rank #2.
Brinker International, Inc. primarily owns, operates, develops and franchises various restaurants under the Chili's Grill & Bar and Maggiano's Little Italy brands. EAT took over Chili's, Inc., a Texas corporation, in September 1983 and completed the acquisition of Maggiano's in August 1995. Chili's is a preeminent leader in the bar & grill category of casual dining. The brand has been functioning for over the last 40 years.
Brinker International's expected earnings growth rate for the current year is 37.1%. The Zacks Consensus Estimate for current-year earnings has improved 5.1% over the past 60 days. EAT currently sports a Zacks Rank #1.
Wingstop Inc. franchises and operates restaurants. WING operates through the Franchise segment and the Company segment. Wingstop offers cooked-to-order, hand-sauced and tossed chicken wings.
Wingstop'sexpected earnings growth rate for the current year is 37.1%. The Zacks Consensus Estimate for current-year earnings has improved 14.5% over the past 60 days. WING currently sports a Zacks Rank #1.
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