3 Restaurant Stocks Cooking Up Beats For Q1 Earnings

The latest Earnings Outlook shows optimism over this earnings season, with the bottom line of the S&P 500 index expected to grow 17.8% and revenues projected to rise 7.6%.

Also, first-quarter earnings for the 52 S&P 500 companies, which have already released results, have posted earnings and revenues growth of 27.9% and 10.7% respectively, from the prior-year quarter. Moreover, 84.6% of the companies surpassed EPS estimates while 78.8% topped revenues.

Here’s How Restaurants Can Build Your Appetite

After surviving the seven-quarter spell of declining comps, the U.S. restaurant industry was pleasantly surprised in the fourth quarter of 2017. According to TDn2K’s The Restaurant Industry Snapshot, fourth-quarter comps were up 0.4%, comparing favorably with the third quarter's comps decline of 1%. March shone bright on the industry as it recorded the highest sales growth since October 2017, with comps growing 0.8%. Comps in the first quarter, however, ticked up only 0.1% year over year. Nonetheless, the industry has posted two successive quarters of positive comps which reflects slow yet steady growth.

Moreover, the restaurant industry saw sales growth in the last four of the past six months. This indicates that the soft performance during the first two months was primarily due to external factors like bad weather.

The turnaround for most restaurants, starting November 2017, was backed by a rise in consumer demand and discretionary spending. This is evident from the fact that guest check growth has been accelerating in recent quarters. Average of guest check growth in the first two quarters of 2017 was 2.1% while that of the last two quarters was 2.3%. Moreover, in the first quarter of 2018, average guest check rose year over year to 2.8%.

Moreover, most of the restaurants are adopting aggressive sales-building strategies to drive demand. The fourth quarter bore the fruits of these efforts. We believe that the first quarter might also have witnessed an overall improvement in restaurant sales given the operational efficiencies of restaurant bigwigs.

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