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4 US Restaurant Stocks That Growth Investors Should Look at

Shake Shack
Shake Shack

Growth investing is an effective way to increase the value of your investment portfolio to better prepare yourself for retirement.

Luckily, there are a plethora of growth stocks out there for investors to choose from.

That said, it can be tough to nail down which stocks to buy from this burgeoning list.

A promising sector to look at is US food and beverage and the restaurant chains that are operating there.

With food being a consumer staple, these four restaurant stocks may promise tasty returns for investors.

Chipotle Mexican Grill (NYSE: CMG)

Chipotle Mexican Grill is a Mexican dining chain with nearly 3,500 restaurants in the US, Canada, the UK, France, and Germany as of 31 March 2024.

The company reported a sparkling set of earnings for the first quarter of 2024 (1Q 2024).

Revenue jumped 14.1% year on year to US$2.7 billion with comparable restaurant sales increasing by 7% year on year.

Operating profit climbed 20% year on year to US$441.3 million while net profit improved by 23.2% year on year to US$359.3 million.

Chipotle also generated a positive free cash flow of US$436.5 million, 30% higher than the US$334.7 million churned out a year ago.

A total of 47 new restaurants were opened during the quarter.

For 2024, management is guiding for full-year comparable restaurant sales growth in the mid-to-high single-digit range.

A total of between 285 and 315 new restaurants are slated to be opened.

Shareholders also recently approved a historic 50-for-one share split by Chipotle to take effect on 18 June.

Shake Shack (NYSE: SHAK)

Shake Shack serves American classics such as beef burgers and crispy chicken in its restaurants.

The company has over 520 locations worldwide, including more than 335 in the US and 185 international locations.

For 1Q 2024, Shake Shack saw its revenue rise 14.7% year on year to US$290.5 million.

The company eked out a small operating profit of US$34,000, reversing the US$3.2 million operating loss a year ago.

Net profit came in at US$2 million, a turnaround from the prior year’s net loss of US$1.5 million.

A total of seven new restaurants were opened in 1Q 2024 compared to the end of 2023, taking the total store count to 525.

This store count was also 16.9% higher year on year compared to the 449 stores in 1Q 2023.

For 2024, Shake Shack plans to open a total of 80 new stores, with 40 being company-operated and 40 licenced.

Management intends to strengthen brand awareness while growing sales and launch an expanded Korean menu early in the quarter while implementing omnichannel marketing strategies.

The burger chain has also guided for higher restaurant-level margins with the target to reduce build costs by 10%.

Domino’s Pizza (NYSE: DPZ)

Domino’s Pizza is the largest pizza company in the world with more than 20,700 stores in more than 90 markets.

1Q 2024 saw revenue rise 5.9% year on year to US$1.1 billion while operating profit climbed 18.6% year on year to US$210.4 million.

Domino’s net profit was US$125.8 million for the quarter, up 20% year on year.

The business also generated a positive free cash flow of US$103.3 million, up 8% year on year.

Domino’s declared a quarterly dividend of US$1.51 per share, up nearly 25% from the US$1.21 paid out a year ago.

The business enjoyed a same-store-sales growth of 5.6% for its US stores in 1Q 2024 while the international division saw a same-store-sales growth of 0.9%.

A total of 164 net new stores were opened in 1Q 2024, taking the total store count as of 24 March 2024 to 20,755.

Management’s long-term guidance for the business from 2024 to 2028 is to achieve 7% annual global retail sales growth and open 1,100+ net stores per year.

Brinker International (NYSE: EAT)

Brinker International is a leading casual dining restaurant chain which owns, operates, or franchises more than 1,600 restaurants in 29 countries under Chili’s Grill & Bar and Maggiano’s Little Italy.

For the first nine months of fiscal 2024 (9M FY2024) ending 27 March 2024, Brinker’s revenue rose 4.9% year on year to US$3.2 billion.

Operating profit surged 83.9% year on year to US$156.5 million while net profit more than doubled year on year to US$98 million.

The restaurant chain generated a positive free cash flow of US$139.5 million, more than double that of the US$64.2 million churned out a year ago.

Brinker intends to open around 28 to 34 restaurants for FY2024.

On a company-wide basis, comparable restaurant sales improved by 3.3% for the latest quarter and CEO Kevin Hochman attributed this to continued progress to improve customer experience along with initiatives that drove higher traffic.

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Disclosure: Royston Yang does not own shares in any of the companies mentioned.

The post 4 US Restaurant Stocks That Growth Investors Should Look at appeared first on The Smart Investor.