Yesterday, I made mention of the fact that casual dining stocks have been slipping in Portfolio Grader as consumers are cutting back. The important thing here is that they are cutting back, not cutting out. Evenings are still a pretty crowded affair for most Americans, especially in a world of two-income families with kids in afterschool activities.
We still like our weekend time with perhaps a movie and a quick dinner, but where we go to eat is changing. These fast food and take-home dining companies are doing extremely well right now.
Sonic (SONC) calls itself America’s drive through, and Americans certainly are choosing the fast food restaurant with increasing frequency. The company is currently engaging in what they call coast-to-coast expansion as they push their traditional central US markets out to both the eastern and western portions of the country.
Sonic recently announced the opening of 14 new locations in Seattle as well as entering markets like California and New York. The company also just announced a $40 million stock buyback that should provide additional support and buying pressure for the stock price. So far this year, earnings are up more than 90%, and the strong fundamentals are reflected in Portfolio Grader. The stock was upgraded to an “A” in August and is currently a “strong buy”.
Wendy’s (WEN) is also seeing revenues and profits pick up — the company’s new products and marketing strategies are a hit with cost-conscious diners. They are also taking steps to lower interest costs and refranchising more than 400 locations to improve margins and cash flows. The company has posted strong earnings surprises in two of the last three quarters, and analysts have ben upgrading the stock. The stock was also upgraded to an “A” in August and is a “strong buy” at the current price.
Americans have always loved their pizza, and they are increasingly turning towards the fast food staple as a less expensive dining choice. Whether it’s a quick Friday night dinner or big game Sunday festivities, the phones are ringing off the hook at Domino’s (DPZ). The company has posted four consecutive positive earnings surprises, and the excellent fundamentals are recognized by Portfolio Grader. The stock was upgraded to an “A” back in May and remains a “strong buy” today.
Americans are being more careful with their dining dollar and are increasingly choosing faster, inexpensive options. This is excellent news for companies that serve this part of the marketplace, and they’re now in excellent position to lead the market higher.
Louis Navellier is Editor of Blue Chip Growth.