4 Restaurant Stocks Set To Beat Estimates This Earnings Season

The impact of lower foot traffic and high costs are likely to show on the Restaurant industry’s fourth-quarter 2019 results. According to Black Box Intelligence (formerly TDn2K), restaurant industry’s same-store sales are likely to see a decline of 0.1%. The decrease can primarily be attributed to same-store traffic decline of 3.4%.

Moreover, high cost of operations has been plaguing the restaurant giants for a quite a while. Further, sales-building efforts such as promotional activities and convincing pricing strategy are detrimental to margins. Apart from this, competition, high wage and food cost inflation remained concerns. Moreover, most restaurateurs have been facing rising employee vacancies and are perpetually understaffed, a trend that is likely to reflect on overall performance.

Nonetheless, the restaurant operators are continuously trying to strategize and maintain competitive edge by catering to changing preferences and trends. Partnerships with delivery channels like DoorDash, Grubhub, Postmates and Uber Eats, digital innovation, rollout of self-service kiosks and loyalty programs are likely to have benefited the industry in the fourth quarter.

Considering the trend-driven nature of the industry, restaurateurs have been constantly innovating items for consumers while maintaining complete transparency about ingredients. Moreover, restaurant operators have been focusing on driverless delivery systems to drive sales. This is expected to bring down expenses substantially as it does away with delivery personnel.

Moreover, increase in consumer spending, steady rise in wages and lower unemployment are likely to have driven the industry in fourth-quarter 2019.

How to Pick the Right Stocks?

Amid a large number of restaurant stocks, it is by no means an easy task for investors to arrive at stocks that have the potential to deliver better-than-expected earnings.

While there is no fool-proof method of picking outperformers, our proprietary methodology — the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — helps in identifying stocks that have high chances of delivering a positive surprise in their upcoming earnings announcement. Our research shows that for stocks with this combination, the chance of a positive earnings surprise is as high as 70%.

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Disclosure: Zacks.com contains statements and statistics that have been obtained from sources believed to be reliable but are not guaranteed as to accuracy or completeness. References to any specific ...

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