Restaurant stocks are rising again after several difficult years during the Covid-19 pandemic. The S&P 500 Restaurants Sub Industry Index has increased .5% this year, and is up 16% from a low reached in October of last year during a broad market downturn.
While not all restaurant stocks are flying high right now, many have turned a corner and are succeeding in the intensely competitive industry. Companies are capitalizing on the return of in-person dining by innovating their menus, renovating their restaurant locations and spending heavily on promotions to keep customer traffic brisk. Specifically, these three companies look like they will be cooking up success in March 2024.
Domino’s Pizza (DPZ)
Domino’s Pizza (NYSE:DPZ) just raised its quarterly dividend by 25% after it reported strong financial results for the final quarter of 2023. Going forward, Domino’s will pay its shareholders a quarterly dividend of $1.51 a share, up from $1.21 previously. Domino’s board of directors also approved a new stock buyback of up to $1 billion, which is in addition to the $141 million that’s remaining on a current share repurchase program.
These benefits to shareholders compliment the performance of DPZ stock, which is up 8% this year and up 45% in the last 12 months. Fueling all of this are strong earnings from Domino’s Pizza and continued growth at the company. Domino’s topped Wall Street forecasts for both profits and sales in its most recent earnings print. The company also opened more than 300 overseas locations and 100 new stores in America in just the fourth quarter of 2023.
Restaurant Brands International (QSR)
Speaking of strong earnings, Restaurant Brands International (NYSE:QSR) also continues to issue solid financial results. The company that owns and operates Burger King, Popeyes and Firehouse Subs, recently reported earnings per share (EPS) of 75 cents versus 73 cents that was expected. Revenue in Q4 2023 was $1.82 billion, slightly ahead of the $1.81 billion that was forecast. Total sales were up 8% from a year earlier.
Key to the company’s success has been a turnaround at Burger King. Restaurant Brands has spent heavily to remodel Burger King restaurants and is also investing in advertising and marketing to drive customer traffic and sales. Restaurant Brands has also acquired Burger King’s largest U.S. franchisee, Carrols Restaurant Group, in a $1 billion deal to help accelerate renovations at various outlets. QSR stock is up 33% in the past year. As far as restaurant stocks go, this diversified brand with many different holdings is a good choice for investors.
McDonald’s (MCD)
McDonald’s (NYSE:MCD) has work to do, but the world’s largest quick-service restaurant chain has launched an aggressive growth strategy that should lift its stock higher. At the end of last year, McDonald’s announced plans to open 10,000 new restaurant locations and add 100 million members to its loyalty rewards program by 2027. The targets are part of the company’s plans to grow its worldwide sales and boost its stock.
Management said that by 2027 they want to have 50,000 restaurant locations globally. To reach that goal, McDonald’s plans to open 900 new locations in America, 1,900 restaurants internationally and 7,000 units in developing markets. The company is actively testing a new spin-off brand called “CosMc’s,” targeting teens and twentysomethings. The growth strategy arrives as McDonald’s continues to post decent financial results.
Sadly, the growth plan and earnings haven’t helped MCD stock lately as it’s down 5.5% year to date (YTD). But it is likely only a matter of time before investors rediscover this iconic restaurant stock.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
