Starbucks Corporation, the largest coffee chain in the world (SBUX) in Seattle, Washington, roasts and retails its specialty coffee, bottled coffee beverages and a line of ice cream products worldwide. The company reported year-over-year revenue and EPS increases in the first quarter of its fiscal 2022, but did not exceed analysts’ estimates. The stock price is down 5.1% over the past month. The company said growing inflationary pressure, supply chain constraints and labor shortages forced it to raise prices. In addition, the company witnessed a unusual level of store closures in January.
As a result, analysts have revised down their estimates for the current quarter. Additionally, the company announced that it raise prices again this year. However, given the current volatility in the stock markets, this overvalued stock could suffer a price decline in the short term. SBUX’s futures price/sales of 3.26x is 215.6% above the industry average of 1.03x.
A sharp drop in COVID-19 cases has allowed restaurants to attract increased foot traffic in recent times. Additionally, continued contactless ordering, drive-thru and restaurant trends are expected to drive industry sales. The global fast food market is expected to grow at a pace 5.1% CAGR to $815.60 billion by 2026. Against this backdrop, we think it might make sense to bet on Darden Restaurants, Inc. (DRI), Texas Roadhouse, Inc. (TXRH), and Bloomin’ Brands, Inc. (BLMN), which we believe are well positioned to outperform SBUX in the coming months.
Darden Restaurants, Inc. (DRI)
DRI in Orlando, Florida owns and operates full-service restaurants. The company operates a variety of seafood and Italian restaurants under numerous brand names.
For its second quarter of fiscal 2022, ended Nov. 28, 2021, DRI’s sales increased 37.2% year-over-year to $2.27 billion. The company’s operating profit was $242.90 million, up 101.2% from the prior year period. While its net income rose 101.3% year over year to $193.20 million, its EPS rose 102.7% to $1.48. He had $746.30 million in Cash and cash equivalents to November 28, 2021.
Analysts expect DRI’s EPS to improve 116.8% year-over-year to $2.12 for its fiscal 2022 third quarter, which ended February 28, 2022. It has exceeded Street’s revenue estimates in each of the past four quarters, which is impressive. The consensus revenue estimate of $2.54 billion for the same fiscal year represents a 33.9% increase over the prior year period. The company’s EPS is expected to grow at a rate of 30.1% per year over the next five years. The stock was down 0.3% over the past month to close yesterday’s trading session at $140.47.
DRI POWR Rankings reflect this promising prospect. The stock has an overall rating of B, which is equivalent to Buy in our proprietary rating system. POWR ratings are calculated by considering 118 separate factors, with each factor weighted to an optimal degree.
The stock has a B rating for growth and quality. Click here to see additional ratings for DRI’s Stability, Value, Sentiment and Momentum.
DRI is ranked #3 out of 44 stocks in the B rating Restaurants industry.
Texas Roadhouse, Inc. (TXRH)
TXRH in Louisville, Ky., operates casual dining restaurants internationally. The company offers entrees, salads, steaks, ribs, dinners, sides, burgers and sandwiches under the Texas Roadhouse, Bubba’s 33 and Jaggers names. As of December 28, 2021, it operated 566 national restaurants and 101 franchise restaurants.
For its fourth quarter of fiscal 2021, which ended December 28, 2021, TXRH’s total revenue increased 40.4% year-over-year to $895.59 million. The company’s operating income was $64.84 million for the quarter, representing an increase of 217.9% over the same period last year. TXRH’s net profit increased 171.4% year over year to $53.06 million. Its EPS was $0.76, up 171.4% from the prior year period. And as of December 28, 2021, the company had $335.65 million in cash and cash equivalents.
The consensus EPS estimate of $0.92 for the first quarter of its fiscal 2022, ending March 31, 2022, represents a 1.1% year-over-year improvement. It has exceeded Street’s EPS estimates in three of the past four quarters. Analysts expect TXRH’s revenue to grow 30.9% year-over-year to $970.50 million for the same fiscal year. The company’s EPS is expected to grow at a rate of 14.6% per year over the next five years. TXRH gained 4.2% in price over the past month to end yesterday’s trading session at $90.95.
TXRH’s strong fundamentals are reflected in its POWR ratings. The stock has an overall rating of B, which is equivalent to Buy in our proprietary rating system.
It has a B rating for value and quality. Click here to see additional ratings for TXRH (Stability, Sentiment, Momentum and Growth).
TXRH is ranked #13 in the Restaurant industry.
Bloomin’ Brands, Inc. (BLMN)
BLMN owns and operates casual, upscale casual and fine dining restaurants internationally. The Tampa, Fla.-based company’s restaurant portfolio includes four concepts: Outback Steakhouse, Carrabba’s Italian Grill, Bonefish Grill and Fleming’s Prime Steakhouse & Wine Bar. As of December 26, 2021, the company owned and operated 1,013 full-service restaurants and franchised 157 restaurants in 47 states.
For the fourth quarter of its fiscal 2021, which ended December 26, 2021, TH’s total revenue increased 28.9% year-on-year to $1.05 billion. The company’s adjusted operating profit was $9.24 million for the quarter, up 95.3% from the same period a year ago. BLMN’s adjusted net profit was $56.88 million, representing an increase of 2845.4% over the prior year period. Its adjusted EPS rose 2,900% year-over-year to $0.60. The company had $87.59 million in cash and cash equivalents as of December 26, 2021.
Analysts expect BLMN’s EPS to be $0.73 for the first quarter of its fiscal 2022, ending March 31, 2022, representing a 1.4% year-over-year improvement. ‘other. The company’s revenue is estimated at $1.12 billion, an increase of 13.9% over the prior year period. It has exceeded consensus EPS estimates in each of the past four quarters. Its EPS is expected to grow at a rate of 6% per year over the next five years. The stock has gained 15.4% in price over the past month to close yesterday’s trading session at $24.09.
BLMN’s POWR ratings reflect its strong outlook. It has an overall rating of B, which is equivalent to Buy in our proprietary rating system.
The stock has an A rating for value and a B rating for quality. In addition to the POWR ratings we just highlighted, one can see the ratings for BLMN stability, momentum, sentiment and growth. here.
BLMN is ranked #7 in the Restaurant industry.
SBUX shares were trading at $91.64 per share on Thursday afternoon, down $1.13 (-1.22%). Year-to-date, the SBUX is down -21.26%, compared to a -8.17% rise in the benchmark S&P 500 over the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a particular interest in researching market inefficiencies. She is passionate about educating investors, so they can succeed in the stock market. Continued…