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Zacks Industry Outlook Highlights: Domino's Pizza, Darden Restaurants, Panera Bread and Buffalo Wild Wings

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For Immediate Release

Chicago, IL - September 21, 2015 - Today, Zacks Equity Research discusses the Restaurants, part 2, including Domino's Pizza, Inc. ( DPZ ), Darden Restaurants, Inc. ( DRI ), Panera Bread Company ( PNRA ) and Buffalo Wild Wings Inc. ( BWLD ).

Industry: Restaurants, part 2

Link: http://www.zacks.com/commentary/56742/restaurants-geared-up-to-boost-comps-time-to-invest

Will Restaurants Continue to Flourish Amid Challenges?

The second half of the year always holds more promise than the first half for restaurant stocks, largely as a result of the holiday season. People trend to dine out more in this period, thereby translating into strong gains for the restaurant industry. On top of this seasonality factor is the overall favorable macro backdrop for the industry, characterized by a steadily improving labor market, stable energy costs and rising consumer confidence.

These positive factors are showing up in the industry's metrics. Same-store sales for the month of August grew 1.7%, which was 0.1% better than July, per TDn2K's Black Box Intelligence. With this improvement, the industry is expected to post positive same-store sales growth for the third quarter, marking the fifth consecutive quarter of positive same-store sales. Unlike same-store sales, traffic has been on the weak side, though even that appears to be improving lately.

Notably, the Restaurant Performance Index (RPI) that tracks the health and outlook for U.S. restaurants came in above 100 for the month of July, marking the 29th consecutive month in which the RPI remained above 100, according to National Restaurant Association. Meanwhile, the Current Situation Index that measures trends in four industry indicators namely same-store sales, traffic, labor and capital expenditures recorded the strongest increase in July since Dec 2014.

Given the positive factors, the restaurant industry is expected to generate sales of more than $709.2 billion in 2015 -- marking the sixth consecutive year of real (inflation-adjusted) sales growth for the industry. However, the growth rate has been declining, possibly due to the challenges that the industry faces. These include high food and labor costs, currency headwinds, a cooling Chinese economy and a tightening labor market.

Zacks Industry Rank - Positive Outlook

Within the Zacks Industry classification, the restaurant industry is grouped within the broader Retail sector. We rank all 260+ industries in the 16 Zacks sectors based on earnings outlook and fundamental strength of the constituent companies in each industry.

To learn more visit: About Zacks Industry Rank .

As a guideline, the outlook for industries in the top 1/3rd of all Industry Ranks or a Zacks Industry Rank of #88 and lower is 'Positive,' the middle 1/3rd or industries with Zacks Industry Rank between #89 and #176 is 'Neutral' and the bottom 1/3rd or Zacks Industry Rank of #177 and higher is 'Negative.'

The Zacks Industry Rank for the restaurant industry is currently #58. This implies that it is in the top 1/3rd of all industries ranked, highlighting the group's near-term positive outlook. We believe that the positive outlook reflects improving same-store sales trends.

Earnings Trends

The restaurant industry falls under the broader Retail-Wholesale sector, with an earnings and revenue beat ratio of 52.4% and 40.5%, respectively, as of Sep 4, 2015, for the second quarter.

Earnings grew 3.9% in the second quarter while on the revenue front the sector recorded an increase of 5.8%.

Earnings are expected to increase 0.4% and 6.4% in the third and fourth quarter of 2015, respectively. Meanwhile, revenues are expected to grow a respective 3.5% and 7.1% in the third and fourth quarters, possibly on improving consumer sentiment. For more details about earnings of this sector and others, please read our ' Earnings Trends ' report.

A Glimpse at Second Quarter Beats & Misses

Among the companies in our coverage universe, restaurateurs like Domino's Pizza, Inc. ( DPZ ) and Darden Restaurants, Inc. ( DRI ) posted better-than-expected quarterly results with earnings and revenues beating the Zacks Consensus Estimate. Meanwhile, Panera Bread Company ( PNRA ) and Buffalo Wild Wings Inc. ( BWLD ) disappointed investors as their earnings and revenue missed the consensus mark.

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DOMINOS PIZZA (DPZ): Free Stock Analysis Report

DARDEN RESTRNT (DRI): Free Stock Analysis Report

PANERA BREAD CO (PNRA): Free Stock Analysis Report

BUFFALO WLD WNG (BWLD): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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