Zacks Industry Outlook CAVA Group, Brinker International and El Pollo Loco

For Immediate ReleaseChicago, IL – November 26, 2024 – Today, Zacks Equity Research CAVA Group, Inc. CAVA, Brinker International, Inc. EAT and El Pollo Loco Holdings, Inc. LOCO.Industry: RestaurantsLink: https://www.zacks.com/commentary/2374812/3-sizzling-hot-restaurant-stocks-benefiting-from-industry-upswingThe Zacks Retail – Restaurantsindustry is benefiting from increased sales. Rapid menu price hikes, average check growth and expansion efforts bode well. Industry participants also benefit from partnerships with delivery channels and digital platforms. Stocks like CAVA Group, Inc., Brinker International, Inc. and El Pollo Loco Holdings, Inc. are well-poised to benefit from the aforementioned factors.Industry DescriptionThe Zacks Retail – Restaurants industry comprises several owners and operators of casual, upscale casual, fine dining, full-service and fast-casual restaurants. Some industry participants operate as roasters, marketers and retailers of specialty coffee. Some companies develop, operate and franchise quick-service restaurants worldwide. A few restaurant operators offer cooked-to-order dishes, which include noodles and pasta, soups, salads and appetizers.Some industry players develop, own, operate, manage and license restaurants and lounges worldwide. A few companies also operate technology-enabled Japanese restaurants in the United States and provide Japanese cuisine through a revolving sushi service model.4 Trends Shaping the Future of the Restaurant IndustryRobust Sales Growth: Despite inflationary pressures, sales at U.S. restaurants continue to rise. According to the Commerce Department, sales at food services and drinking establishments increased 4.3% year over year in October. Many restaurants are leveraging promotional efforts, forming partnerships and launching products to attract customers.Digitalization to Drive Growth: Restaurant operators’ focus on digital innovation, sales-building initiatives and cost-saving efforts has been a catalyst. With the growing influence of the Internet, digital innovation is the need of the hour. Restaurant operators constantly partner with delivery channels and digital platforms to drive incremental sales.Partnerships with delivery channels like DoorDash, Grubhub, Postmates and Uber Eats, and the rollout of self-service kiosks and loyalty programs continue to drive growth. Restaurant operators also focused on driverless delivery systems to augment sales amid the coronavirus crisis.Off-Premise Sales Acting as Key Catalyst: The industry is gaining from the increase in off-premise sales, which primarily include delivery, takeout, drive-thru, catering, meal kits and off-site options, such as kiosks and food trucks. Most restaurant operators have initiated the testing of ghost or virtual kitchens. The idea of providing off-premise offerings and a connected curbside service has been garnering positive customer feedback.Traffic Woes & High Costs Linger: The restaurant industry has been facing declining traffic for quite some time. A rapid increase in menu prices is the primary reason behind traffic erosion. This decline highlights the ongoing challenges that the industry faces with maintaining customer counts, especially as consumers grow frustrated with rising prices.Then again, restaurant operators are grappling with the high cost of operations. Intense competition, high wages and food cost inflation are concerning. The industry continues to bear increased expenses, which have been affecting margins. Higher pre-opening costs, marketing expenses and costs related to sales-boosting initiatives are exerting pressure on the company’s margins.Zacks Industry Rank Indicates Bright ProspectsThe Zacks Gaming industry is grouped within the broader Retail-Wholesalesector. It carries a Zacks Industry Rank #81, which places it in the bottom 32% of more than 250 Zacks industries.The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates dull near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.The industry’s position in the top 50% of the Zacks-ranked industries results from a positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, analysts are gradually gaining confidence in this group’s earnings growth potential.Before we present a few stocks that you may want to consider for your portfolio, let us take a look at the industry’s recent stock-market performance and valuation picture.Industry Underperforms the S&P 500 & SectorThe Zacks Retail – Restaurants industry has underperformed the Zacks S&P 500 Composite and its sector over the past year.Over this period, the industry has grown 9.7% compared with the Zacks S&P 500 Composite’s jump of 31.2%. The sector has risen 31.1%.Restaurant Industry's ValuationBased on the forward 12-month P/E, a commonly used multiple for valuing restaurant stocks, the industry is currently trading at 26.41X compared with the S&P 500’s 22.43X. It is marginally above the sector’s forward 12-month P/E ratio of 24.15X.Over the last five years, the industry traded as high as 34.67X and as low as 22.13X, the median being at 25.35X.3 Key Restaurant PicksBrinker: The company is benefiting from favorable comparable restaurant sales, driven by menu pricing, higher traffic and a favorable menu item mix. The solid performance of Chili's added to the upside. Brinker also intends to balance value offerings with margin expansion and adaptability to changing consumer preferences to drive growth. The focus on digitalization, remodeling initiatives and menu innovation bodes well.Shares of this Zacks Rank #1 (Strong Buy) company have skyrocketed 255% in the past year. EAT’s fiscal 2025 sales and earnings are anticipated to rise 7.9% and 34.6%, respectively, year over year. You can see the complete list of today’s Zacks #1 Rank stocks here.El Pollo Loco: The company is benefiting from increased system-wide comparable restaurant sales. In the fiscal third quarter 2024, LOCO reported a 2.7% rise in system-wide comparable restaurant sales, attributed to new menu offerings and targeted promotions. El Pollo Loco is taking cost-saving measures, ensuring that food quality and customer experience are enhanced throughout the process. The company made strategic hires, including a chief development officer, to streamline operations and reduce unit build costs. These efforts are expected to improve franchise growth and financial performance in the coming years.LOCO currently flaunts a Zacks Rank #1. The company’s fiscal 2024 earnings are anticipated to improve 16.9% year over year. In the past 30 days, the consensus mark for 2024 earnings has been revised upward by 5.1%.CAVA: The company has been benefiting from menu innovation. The introduction of the latest offerings like Garlic Ranch pita chips and the national rollout of steak has been well-received, driving incremental sales and brand engagement. Garlic Ranch pita chips have become a social media sensation, amassing more than 12 million impressions across various platforms and generating an additional 347 million earned media impressions.CAVA carries a Zacks Rank #2 (Buy) at present. The company’s sales and earnings for 2024 are anticipated to improve 32% and 138.1% year over year, respectively. In the past year, shares of the company have surged 331.7%.Why Haven't You Looked at Zacks' Top Stocks?Since 2000, our top stock-picking strategies have blown away the S&P's +7.0 average gain per year. Amazingly, they soared with average gains of +44.9%, +48.4% and +55.2% per year.Today you can access their live picks without cost or obligation.See Stocks Free >>Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.Media ContactZacks Investment Research800-767-3771 ext. 9339support@zacks.comhttps://www.zacks.comPast performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Brinker International, Inc. (EAT): Free Stock Analysis Report El Pollo Loco Holdings, Inc. (LOCO): Free Stock Analysis Report CAVA Group, Inc. (CAVA): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks