Smart investors will watch restaurant stocks since the business is estimated to generate over $1 trillion in 2024. The industry is expected to gain 200,000 jobs this year, reaching 15.7 million. The industry could add an average of 150,000 jobs per subsequent year, reaching 16.9 million by 2032. Restaurants are the second most popular private sector employment in the U.S.
Also, technology-based eating habits are spreading swiftly. According to Madmobile, 64% of customers prefer to place digital orders, demonstrating the importance of an online presence and transactions when assessing restaurant stocks. Online menus make ordering food even easier.
Online meal delivery is also gaining steam. With a 67% market share, DoorDash (NASDAQ:DASH) leads. Uber Eats and Grubhub follow with 23% and over 8%, respectively. Three or four internet delivery services are used by 41% of restaurant proprietors.
To maximize market returns, investors should choose restaurant stocks with strong analyst rankings, a clever online sales strategy and post-pandemic resilience.
Darden Restaurants (DRI)
Darden Restaurants (NYSE:DRI) is trading lower this year thanks to posting some lackluster results in its most recent earnings report, with EPS clocking in at $2.65, slightly higher than analysts’ $2.61. But its sales of $2.96 billion missed the consensus forecast of $2.97 billion.
DRI purchased Ruth’s Hospitality Group, which owns Ruth’s Chris Steak House, for $715 million. This acquisition added 154 units to Darden’s fine dining portfolio, expanding its brand possibilities and helping increase net sales by 6.8% in the latest quarter.
CEO Rick Cardenas said the firm faces a weaker client market, increased discounts and competitive marketing pressure. Despite these issues, the corporation is focusing on boosting sales. Cardenas also discussed how inflation and labor market concerns are affecting spending.
The company aims to invest $550 to $600 million in new equipment and structures. Darden’s objective is to keep the firm expanding and cope with economic volatility by planning for the following fiscal year.
In issuing the earnings report, DRI also hiked its distribution and unveiled a perky outlook, with 1% to 2% same-store sales growth in fiscal year 2025, EPS between $9.40 and $9.60, and net sales between $11.8 billion and $11.9 billion.
Yum! Brands (YUM)
Yum! Brands (NYSE:YUM) might not seem familiar to the average investor. That is because it operates and manages its business concerns through its own and franchised restaurants under the brands KFC, Pizza Hut and Taco Bell, making it one of the biggest food conglomerates in the world and one of the best restaurant stocks as well.
Due to its operating model and strong international presence, it comes as no surprise that analysts rate YUM shares a Moderate Buy, with the average 12-month price target set around $146, indicating a potential upside of approximately 11% from the current price of $132.
YUM reported substantial second-quarter improvements in many sectors. Company system sales rose 13% due to a 9% increase in same-store sales and 6% unit growth. The quarterly operating profit was $631 million, up 8% from last year. The operating margin rose from 43.6% to 46%. On its Q1 2024 news call, Yum! Brands discussed its financial health despite the market’s difficulties, reiterating its commitment to increasing digital sales.
In addition, YUM raised its quarterly distribution to $0.67 per share, representing a 10% increase from the prior payout. Its yield of 1.9% compares very favorably with the sector average of 0.992%.
Earlier this year, KFC, owned by Yum! Brands, opened its 30,000th restaurant worldwide, once again displaying how quickly and widely the brand has spread and grown.
Uber Technologies (UBER)
Uber Technologies (NYSE:UBER) is a large ride-hailing firm entering our restaurant stocks conversation via its Uber Eats segment; analyst consensus is a Strong Buy with a 23% potential upside.
With 486 million daily users, including 131 million in the U.S., Uber Eats is the biggest food delivery service in the world, serving over 11,000 sites and working with 800,000 restaurants. Uber Eats’s average AOV is $26.19, which shows that customers are ready to pay for quality and ease of use.
In order to make customers happier, Uber Eats now lets customers mix orders from two places without having to pay extra for delivery. This function meets a variety of meal needs or situations where multiple people ask for different types of food.
Tokyo Uber Eats, on the other hand, serves food through robots. Right now, customers have to wait outside for the robot, but in the future, supplies will go to homes or workspaces. This is how Uber Eats helps make up for a lack of workers in aging Japan.
Live location sharing on Uber Eats also helps drivers find customers in parks, beaches and colleges that are hard to reach, which speeds up delivery. The company also just released Uber Bubbles in France and added options for people with food allergies.
On the date of publication, Faizan Farooque did not hold (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.
