The restaurant industry is evolving as a result of digitization. Businesses in this space are automating their processes by utilizing self-service kiosks to lessen employee workload while improving phone orders and the drive-thru experience through AI-powered voice technologies.
Furthermore, the industry's growth is fueled by the expansion of e-commerce/online platforms, on-the-go food services, packaging innovations, a growing percentage of working women, rising disposable incomes, and improved distribution techniques.
Restaurant bookings have soared despite the industry battling inflation and other macro headwinds. According to data compiled by OpenTable, restaurant reservations have grown 34% year-over-year.
Moreover, a survey conducted by the National Restaurant Association shows 77% of consumers plan to order from restaurants as part of their holiday plans. Around 57% plan to eat at a restaurant, while 50% plan to order takeout or delivery. The industry has historically performed well in the fourth quarter due to an uptick in traffic since more people venture out to shop and socialize.
According to a report by Future Market Insights, the food service industry is expected to grow at a CAGR of 5.3% to $5.87 trillion by 2033.
Given this backdrop, it could be wise to invest in fundamentally sound restaurant stocks Bloomin' Brands, Inc. (BLMN), Dine Brands Global, Inc. (DIN), and Good Times Restaurants, Inc. (GTIM) now.
Bloomin' Brands, Inc. (BLMN)
BLMN owns and operates fine dining, upmarket casual, and casual eateries internationally. It operates through two segments, US and International. The company oversees 156 full-service eateries, 172 franchised establishments, and 1,013 full-service eateries globally.
On September 15, BLMN and Grubhub announced their partnership to bring all of BLMN's concepts to the Grubhub Marketplace, where customers may pick them up or have them delivered. Over 1,700 listings, including more than 1,000 restaurant locations and 700 virtual kitchens, will be accessible nationwide.
By expanding its scrumptious portfolio of brands, BLMN will gain from increased sales, more orders, and increased earning potential for its delivery partners through Grubhub's 32 million diners nationwide.
For the fiscal 2022 third quarter ended September 25, 2022, BLMN’s total revenue grew 4.5% from the year-ago value to $1.06 billion, while its income from operations increased 245.8% year-over-year to $51.31 million. Net income rose to $33.05 million, a 554.3% increase year-over-year, and its EPS stood at $0.34, a 1,033.3% increase from the prior year’s period.
BLMN pays a $0.56 per share dividend annually, which translates to a 2.60% yield on the current price. The company’s four-year average dividend yield is 1.61%, and its dividend payments have grown at a 12.8% CAGR over the past three years.
The consensus EPS estimate of $0.64 for the fiscal fourth quarter (ending December 2022) indicates a 7.2% year-over-year improvement. Likewise, the current quarter’s consensus revenue estimate of $1.12 billion indicates a rise of 7.3% from the year-ago quarter. Moreover, BLMN has surpassed the consensus EPS estimates in each of the four trailing quarters.
Furthermore, analysts expect the company’s EPS and revenue for the next fiscal quarter (ending March 2023) to rise 13.2% and 6.3% year-over-year to $0.91 and $1.21 billion, respectively. Shares of BLMN have gained 4.8% over the past six months and 11.3% over the past year to close the last trading session at $21.53.
BLMN’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
The stock has a B grade for Quality and Value. Within the Restaurants industry, BLMN is ranked #8 of 44 stocks. Click here to see additional ratings of BLMN for Growth, Stability, Momentum, and Sentiment.
Dine Brands Global, Inc. (DIN)
DIN owns, franchises, operates, and rents out full-service restaurants globally. It operates through five segments, Applebee's Franchise Operations; International House of Pancakes (IHOP) Franchise Operations; Rental Operations; Financing Operations; and Company-Operated Restaurant Operations.
On December 5, IHOP®, a subsidiary of DIN, launched the new limited-edition IHOP Mini Pancake Cereal in collaboration with General Mills, Inc (GIS). With this renowned launch and the legendary partnership with General Mills, a pioneer in the breakfast and pancake sectors, IHOP hopes to profit strategically.
On the same day, DIN also announced that it has agreed to acquire Fuzzy's Taco Shop® for $80 million in cash from Experiential Brands LLC, a wholly owned subsidiary of NRD Holding Company. By incorporating Fuzzy's 138 stores across 18 states into the DIN family, the business will gain access to its devoted clientele, distinctive branding, and exponential growth trajectory.
For the fiscal 2022 third quarter ended September 30, 2022, DIN’s total franchise revenue increased 2.3% year-over-year to $164.91 million, while its total revenue increased 2% year-over-year to $233.22 million. Its restaurant sales grew 8.4% from the year-ago value to $38.25 million. The company’s adjusted EPS came in at $1.66, compared to $1.55 for the prior-year quarter.
As of September 30, 2022, the company’s total current assets stood at $645.79 million compared to $574.35 million as of December 31, 2021.
On December 2, DIN's Board of Directors declared a quarterly cash dividend of $0.51 per share of common stock which will be payable on January 6, 2023, to the company’s stockholders of record at the close of business on December 20, 2022. The company pays a $1.88 per share dividend annually, which translates to a 2.72% yield on the current price. Its four-year average dividend yield is 2.45%.
For the next fiscal quarter, ending March 31, 2022, analysts expect DIN’s EPS to increase 19.7% year-over-year to $1.84. The company’s EPS for the next fiscal year ending December 2023 is expected to increase by 14.9% year-over-year to $7.01. DIN has surpassed its consensus EPS estimates in each of the four trailing quarters, which is impressive.
The stock lost 0.6% intra-day to close the last trading session at $69.22.
DIN’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.
The stock has a B grade for Quality and Value. Within the Restaurant industry, it is ranked #7 of 44 stocks.
Beyond what we stated above, we also have DIN’s ratings for Growth, Stability, Sentiment, and Momentum. Get all DIN ratings here.
Good Times Restaurants, Inc. (GTIM)
GTIM engages in the restaurant business in the United States. It franchises and operates through two segments, Bad Daddy's Burger Bar restaurants (Bad Daddy’s) in 42 locations; and Good Times Burgers & Frozen Custard (Good Times) restaurants in 32 locations.
For the fiscal 2022 third quarter ended June 28, 2022, GTIM’s restaurant sales increased 7.6% year-over-year to $36.27 million, while its total net revenues grew 7.5% year-over-year to $36.50 million. The company’s Bad Daddy’s Burger Bar restaurant sales rose 11.3% year-over-year to $27.17 million.
As of June 28, 2022, the company's cash and cash equivalents stood at $9.70 million, compared to $8.86 million as of September 28, 2021, while its current assets stood at $13.14 million, compared to $11.44 million as of September 28, 2021.
Analysts expect the company’s EPS to grow 30% per annum over the next five years. Shares of GTIM have gained 12.7% over the past month to close the last trading session at $2.58.
GTIM’s POWR Ratings reflect its strong outlook. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
The stock has an A grade for Value. Within the same industry, it has topped among 47 stocks. Click here to see additional ratings of GTIM for Quality, Growth, Sentiment, Momentum, and Stability.
BLMN shares were trading at $21.49 per share on Monday morning, down $0.04 (-0.19%). Year-to-date, BLMN has gained 5.04%, versus a -15.80% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
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