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Restaurant Sales Increase in September: 5 Stocks to Buy

Restaurant sales are finally showing improvement although they still lag the year-ago period. All retail sales at U.S. restaurants grew in September according to the National Restaurant Association. The economy is gradually reopening and businesses are slowly trying o get back on their feet. After taking a beating for months, restaurants and cafes have finally started witnessing growth in sales.

Also, many workers who were furloughed have started joining back, indicating that the industry has finally started showing some confidence. Hence it is likely that the restaurant industry will gradually recover over the next few months.

Restaurant Sales Improve in September

Sales at U.S. bars and restaurants in September continued to rebound from pandemic-induced drops earlier in the year, though the pace of growth remained slower than the previous months. All retail sales grew 5.4% from the year-ago period in September to $549.26 billion, which was better than the 3.8% year-over-year increase posted in September 2019.

September's sales were up 2.1% from August's seasonally adjusted volume of $54.47 billion, which in normal times would represent a robust increase but were only about half the gains made in July and August in terms of both dollar volume and percentage, according to the National Restaurant Association. September eating and drinking place sales remained nearly $10 billion, or 15%, below their pre-coronavirus levels in January and February, the trade group said.

Finally Some Hiring

Food services and drinking places added 200,300 jobs in September for a total of 10 million jobs, which was 17.6% less than a year ago. The number of added jobs in September comes after a downward-revised increase of 104,300 jobs in August, which means eating and drinking places staffing levels are still down 2.3 million jobs from February's peak, the National Restaurant Association said in an Oct 2 report.

The employment gains in August and September were only a fraction of the 3.5 million jobs added during the first three months coming out of the coronavirus lockdowns, the National Restaurant Association said.

Then again, the economy is again being threatened by the high number of COVID-19 cases being reported every day. Online restaurant orders would see a surge in the days ahead should the situation compel people to stay indoors. This could leave restaurants with the need to hire more cooks, managers and cashiers.

Our Choices

Given this scenario, restaurant stocks should appear rather appealing to investors. We have shortlisted five stocks with a Zacks Rank #1 (Strong Buy) or 2 (Buy) that are likely to bring sumptuous returns in the coming days.You can see the complete list of today’s Zacks #1 Rank stocks here.

Brinker International, Inc. EAT primarily owns, operates, develops and franchises various restaurants under Chili’s Grill & Bar (Chili’s) and Maggiano’s Little Italy (Maggiano’s) brands. 

The company’s expected earnings growth rate for the current year is 22.2%. The Zacks Consensus Estimate for current-year earnings has improved 16.8% over the past 60 days. Brinker International flaunts a Zacks Rank #1.

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 comprise nearly 70% of the total system.

The company’s expected earnings growth rate for next year is 17.9%. The Zacks Consensus Estimate for current-year earnings has improved 1.5% over the past 60 days. Jack In The Box carries a Zacks Rank #2.

El Pollo Loco Holdings, Inc. LOCO through its subsidiary, develops, franchises, licenses and operates quick-service restaurants under the name El Pollo Loco.

The company’s expected earnings growth rate for the current year is 2.7%. The Zacks Consensus Estimate for current-year earnings has improved 1.3% over the past 60 days. El Pollo Loco holds a Zacks Rank #2.

McDonald’s Corporation MCD is a leading fast-food chain that currently operates roughly 38,000 restaurants in more than 100 countries. The company mainly operates and franchises quick-service restaurants (QSRs) under the McDonald’s brand. 

The company’s expected earnings growth rate for next year is 37.3%. The Zacks Consensus Estimate for current-year earnings has improved 2.4% over the past 60 days. McDonald’s holds a Zacks Rank #2.

Yum Brands, Inc. YUM is the global leader in multi-branding and offers consumers more choice and convenience at one outlet. The company presently reports through four segments – KFC (44.8% of total revenues in first-quarter 2020), Pizza Hut (18.6%), Taco Bell (35.9%) and Habit Burger Grill (0.7%). 

The company’s expected earnings growth rate for next year is 20.8%. The Zacks Consensus Estimate for current-year earnings has improved 1.9% over the past 60 days. Yum Brands carries a Zacks Rank #2.

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Jack In The Box Inc. (JACK): Free Stock Analysis Report
 
McDonalds Corporation (MCD): Free Stock Analysis Report
 
Brinker International, Inc. (EAT): Free Stock Analysis Report
 
Yum Brands, Inc. (YUM): Free Stock Analysis Report
 
El Pollo Loco Holdings, Inc. (LOCO): Free Stock Analysis Report
 
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